4.Post-Jury Evidentiary and Exhibit Matters
82 linesMS. SASSOON: Objection, your Honor. This is confusing. She just said that that was a ledger entry.
MR. COHEN: That's not what she said.
JUDGE KAPLAN: I have a thought.
MR. COHEN: Okay.
JUDGE KAPLAN: It's been a long day.
MR. COHEN: Okay.
JUDGE KAPLAN: I have the feeling that if we broke now and started in the morning, Mr. Cohen, you'd be happier, everyone would be fresher, and this could get sorted out overnight, right?
MR. COHEN: Yes. I would appreciate that. I could tell stories from my legal career, but I don't think anyone would be interested.
JUDGE KAPLAN: No, we'd all be interested but we're all going to be asleep by then. Not because of the stories but——
MR. COHEN: Well, maybe.
JUDGE KAPLAN: No, no, on the occasion of. Okay. Let's do that.
MR. COHEN: Okay. Thank you.
JUDGE KAPLAN: Folks, 9:30 tomorrow morning.
(Continued on next page)
(Jury not present)
JUDGE KAPLAN: Okay, folks. Be seated. I think we have two open items of business that may affect the cross, right? We have this controversy about mention of Anthropic and Mr. Cohen's letter of October 10th, to which I think I have an answer for you. The witness is out of the room. Let me address a question to the government. I understand the point about mention of Anthropic. Suppose that the defendant had otherwise admissible evidence, fully admissible, not about Anthropic or any other specific investment but about what their letter of the 10th refers to as the portfolio nature of venture capital investing. What would be the government's position about that?
MS. SASSOON: So I think there are two distinct issues here. One is pre-collapse and one is post-collapse. I think anything about the portfolio post-collapse is totally irrelevant. If we're talking about pre-collapse, there was some testimony that these venture investments were speculative and risky, and I think that's what the defense wants to address. I think from the government's standpoint, it was appropriate to elicit that information because the defense has claimed a variety of the defendant——
JUDGE KAPLAN: But it's in already, so nobody's saying it wasn't.
MS. SASSOON: So I think that goes to the defendant's knowledge and his intent. But the core issue here is whether he misappropriated the money, and whether he put it into a government bond or a venture portfolio, it's still fraud. And so we think there's limited to no relevance to any evidence that they want to bring in about how they could have shot the moon with one of these investments.
JUDGE KAPLAN: So your position is even a general discussion of a portfolio nature or portfolio approach to venture capital investing would be irrelevant.
MS. SASSOON: One moment. Yes, so we think that the safety or riskiness of the investments is ultimately not relevant to the misappropriation. On this question about the portfolio, I don't understand the proffered relevance by the defense, but if they explain it now, I would ask for an opportunity to respond.
JUDGE KAPLAN: Well, that's your cue, Mr. Cohen.
MR. COHEN: Thank you, your Honor. A couple of things. The government has put on evidence that one of the ways in which the loans from FTX to Alameda were invested was in a series of venture investments, which it has gone out of its way to describe as speculative and risky. We had extensive testimony, including from today's witness——yesterday and today——about her view of the riskiness around making such investments, and the government is——although they claim it's not part of their case, they're doing it an awful lot, Judge, and they're clearly trying to argue to the jury that the fact that the investments were, in their view, risky is itself proof of the crime. And the only way to rebut that, your Honor, is for us to be able to proffer evidence, either through cross-examination or otherwise, on a couple of levels. One is that, as your Honor described it, the portfolio——this venture investing is a portfolio approach. You buy in ten startups; if two hit, you're doing great. If one of them was, you know, Facebook, you'd——
JUDGE KAPLAN: It depends how much you put in the bad ones——
MR. COHEN: Correct.
JUDGE KAPLAN: ——and what the return on the good ones were, and how much you put in the good ones.
MR. COHEN: Correct. And here——
JUDGE KAPLAN: So it could be a disastrous venture, or not.
MR. COHEN: Correct. But here, just to give your Honor context, the Anthropic investment was a $93 million investment that the trustee in bankruptcy sold for a hundred million and is today worth a billion dollars.
JUDGE KAPLAN: Publicly traded?
MS. SASSOON: No, your Honor. This is a private valuation, which, if you take this case as just one example, it's highly misleading about whether you could actually liquidate for that amount of money. And this is part of the concern about Anthropic specifically. It has the potential to create a misleading impression with the jury about the nature of this portfolio, which perhaps in hindsight, you could make these arguments, but has no bearing on the fact that it was a gamble at the time that these investments were being made.
MR. COHEN: So then why are they arguing that these investments were risky and illiquid and so forth and trying to suggest they were improper if it's not related to the crime? Why are we having hours of testimony?
JUDGE KAPLAN: The crime charged is that he took the money.
MR. COHEN: Right.
JUDGE KAPLAN: That's the crime.
MR. COHEN: Right.
JUDGE KAPLAN: And what he did with it afterward doesn't matter. This is like saying that if I break into the Federal Reserve Bank, make off with a million bucks, spend it all on Powerball tickets and happen to win, it was okay.
MR. COHEN: Your Honor, they're offering evidence exactly on your Honor's hypothetical. They are offering evidence that you used the money for Powerball as proof of the crime.
JUDGE KAPLAN: No, I don't see it that way. I mean, the crime is the misappropriation. That's it, it's finished, the minute the misappropriation happens, whether it's used wisely, foolishly, or whatever, and that's my view. I certainly would never have let in the Anthropic because letting in the Anthropic is kind of like trying to prove that you're a good guy by looking around the room, picking your three best friends, and asking them what kind of a guy you are, and ignoring everybody else. Right? That doesn't work. You don't get to pick your friends and do it that way. It's just unrepresentative. It's meaningless. So——
MR. COHEN: But that takes us back to the more narrow point about whether or not we can elicit the nature of venture investing.
JUDGE KAPLAN: Well, it does take us back to that. And so far as that is concerned, it might be one thing if you had a qualified witness to talk about that. I'm not saying that would be admissible. I have my doubts about that. But I can't see how eliciting anything from Ms. Ellison on cross-examination on this subject possibly overcomes all the barriers to relevance and admissibility, and maybe you can enlighten me on that.
MR. COHEN: Well, they have elicited this testimony from Ms. Ellison. They have elicited from her that she viewed the venture investments as risky investments, with the implication that the defendant should not have made them and that they were reckless, the defendant was reckless for making them, and one way to rebut that is to show they were part of a portfolio approach to venture investing, which is very common.
JUDGE KAPLAN: Which might or might not have paid off.
MR. COHEN: Right.
JUDGE KAPLAN: And she had her opinion.
MR. COHEN: And if the witness doesn't know about the portfolio theory of venture investing, then we are bound by the answer.
MS. SASSOON: Your Honor, that testimony was admitted for a proper purpose, which is to show the defendant's knowledge of the misappropriation. One——
JUDGE KAPLAN: And her state of mind at various points.
MS. SASSOON: Her state of mind and the fact that the money was not just sitting in a bank account ready to be provided to customers, it had been misappropriated and spent on other things, and there were discussions with the defendant establishing that he knew that it was being spent on other things and that this put them in a position of having to use customer money for other expenses, which is exactly what happened. And the fact that in 2021 she's warning the defendant about these investments is inextricably linked to what happened in June when they don't have the money and they have to use customer funds, and it goes to his knowledge about the use of funds to repay the loans because he knows that the money is tied up in illiquid venture investments.
JUDGE KAPLAN: Yes. The government's motion on this point is granted, period. I'm not ruling now on the question of whether somewhere down the road you want to proffer a witness on this. I'll cross that bridge if, as, and when I get to it.
MR. COHEN: Understood, your Honor.
JUDGE KAPLAN: Okay. Now the other issue is the application by the defense with respect to auto-deletion, where the witness said that she had been told, or the employees generally had been told, that the defendant told people generally to set auto-deletion on some of these messaging accounts and had some other comments that she attributed to him. How about that one, or have we really covered that already? Mr. Cohen?
MR. COHEN: I'm sorry, your Honor. I apologize. I didn't hear you. I'm sorry.
JUDGE KAPLAN: I said how about that, or have we covered this already?
MR. COHEN: Well, I think it is covered in the letter, and the testimony was elicited today about the involvement of counsel, and we would like to be able to ask it——
JUDGE KAPLAN: And what was said about the involvement of counsel——
MR. COHEN: Well, the——
JUDGE KAPLAN: ——on the subject of auto-deletion?
MR. COHEN: On the subject of auto-deletion was opened up by the witness.
JUDGE KAPLAN: That's not what you said.
MR. COHEN: Right. That's fair. That's fair, your Honor. That's fair, your Honor.
JUDGE KAPLAN: Nobody, to my recollection——correct me if I'm wrong——nobody said one word on the direct about counsel even being aware that there were settings to auto-deletion. Am I wrong?
MR. COHEN: You are not wrong, your Honor, but we believe if we ask this question on cross-examination, we will get a different answer. And we should be entitled to probe it.
MR. ROOS: So, your Honor, I think the government is guided by your Honor's October 1st order on this, outlining both the potential probative nature of the involvement of counsel but also the risk of prejudice, confusion. On page 9 of your Honor's order, you outlined particular things that were important, including specificity around the involvement of counsel, what they knew, what they blessed, specificity about the topics and their involvement, and I think in order for there to be any relevant and nonprejudicial basis to ask the question of Ms. Ellison, there at first needs to be a proffer of what exactly this was. Was it just there's some indication that lawyers were involved in retention policies generally or is it something more specific, like some particular lawyer, who we'll name and we have specifics about their involvement, said on this date, it's okay to use an auto-delete Signal messaging system. And so I think before we venture down this road, we need a little more from the defense.
JUDGE KAPLAN: Well, there's also——and then I'll give Mr. Cohen an opportunity to respond——there is also the question, quite important in this context, as to what, if anything, the defendant knew about it——the "it" being whatever counsel's role was, if any, and what the lawyers knew about it, because it's reasonably clear that probably something like 502 out of the Fortune 500 companies have record retention policies that are written by major law firms for them, or at least blessed by major law firms, and that's of no relevance at all in this context, where there is evidence that somebody, with the intent to make sure there was no evidence, saw to it that documents disappeared, or that a policy was adopted that would get rid of them every 30 days, for the purpose of avoiding the perpetuation of evidence, which is something of which there is evidence so far. Now of course it's not binding on the defense, but there is evidence.
MR. ROOS: And your Honor, if I can just make one more point on that. I think the other issue is going to be, is there an admissible nonhearsay purpose for the question to Ms. Ellison. And to play this out, if the defense asks Ms. Ellison, Did the defendant ever tell you there was a lawyer blessing of an auto-delete policy, that seems to be for its truth, and there's real questions about its accuracy and legitimacy. And so I don't know that Ms. Ellison——what the answer would be, but I think there needs to be at least a little more investigation here before they're allowed to spring it on the witness.
JUDGE KAPLAN: The last word for the evening on this?
MR. COHEN: Yes, your Honor. I have a suggestion for the Court to think about overnight. We could take that testimony outside the presence of the jury and the Court could then have a further record to make any ruling.
MR. ROOS: I don't know. If they don't have a basis to ask the question now, then they should not get a test run outside the presence of the jury.
MR. COHEN: We believe that she will say that lawyers were involved in the records——excuse me——auto-deletion policy. Now we don't have access to her like the government does, so we haven't had a chance to interview her beforehand, but we believe she will say that. If she doesn't say that, we're bound by her answer. So——
JUDGE KAPLAN: And are you willing to broaden that to say that she would say that lawyers were involved in consulting on the use of the auto-deletion policy and that lawyers were aware that the reason that the direction was given to do that by whoever gave the direction was to ensure that evidence disappeared every 30 days?
MR. COHEN: Well, I don't think——I don't know what she would say. I would be fine stopping at the question yes or no if she knew that lawyers were involved in the policy.
JUDGE KAPLAN: All right. I will think about it. But this is a problematic subject, and we all have been aware of that for a long time. Okay. Thank you.
MR. COHEN: Challenging, your Honor. Not problematic, challenging.
JUDGE KAPLAN: I'd have said problematic more than challenging.
MS. SASSOON: Quickly, your Honor?
JUDGE KAPLAN: Yes.
MS. SASSOON: Defense provided us I believe Monday evening with a list of exhibits that it may use for cross-examination to which we are likely to have hearsay objections. And I'm mindful of trying to minimize sidebars, so I wanted to inquire about how the Court would like to address that. Perhaps come in ten minutes early tomorrow to hash some of this out? I'm wary of filing a late-evening letter.
JUDGE KAPLAN: No, no, no, no, no. We're having a moratorium on late-evening letters. Look, I have a binder 3 inches thick, which I'm sure is what you're referring to, and the best way of dealing with it is probably going to be one at a time, but if somebody has a better idea, I'll consider it.
MR. COHEN: Your Honor, we can try to confer with the government. Just for your Honor's benefit, much of the binder is material we might use in impeachment and we're not seeking to offer. I think the disputes will be about a relatively limited set of documents, which we can talk to the government about tonight again and see if we can work something out.
JUDGE KAPLAN: Well, I urge you to do that, and I'm grateful for the clarification from you. And as I said at the sidebar before, I know I'm dealing with some very fine lawyers here and, you know, people get a little tense once in a while. It happens. But it's all in good faith. Good night.
(Adjourned to October 12, 2023, at 9:30 a.m.)