John Blume, Director of the Cornell Death Penalty Project, discusses the Supreme Court granting review to an Oklahoma inmate on death row in an unusual case. James Park, securities law expert and professor at UCLA Law School, discusses the faceoff between the SEC and Binance in court. June Grasso hosts.
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This is Bloomberg law with June Gro from Bloomberg Radio Richard glossup has been just hours away from being executed three times he’s maintained his innocence through more than a quarter Century on Oklahoma’s death row telling news outlets like Sky News that he’s not guilty of hiring a coworker to kill the
Owner of the motel where he worked in 1996 I didn’t commit this crime and there’s no doubt in my mind that I may die because of this I’m truly sorry for what happened to Barry I am but I had nothing to do with it glossip’s case has garnered International attention you
Never done this before no never been this close to a murderer before not that I know of what is a n doing in a place like this sister Helen Pan the death penalty opponent portrayed in the 199 5 movie Dead Man Walking has taken up his cause as have celebrities like Kim
Kardashian and Susan Sarandon Richard’s uh case is so typical you know bad representation two trials that were ridiculous no physical evidence you know he’s put there by a snitch who actually did kill the person and then the snitch is has life and this guy is being put to
Death and now glossip has support from an unpr precedented Place Oklahoma’s Republican attorney general Gentner Drummond the state’s top prosecutor has been urging the courts to undo his conviction saying he didn’t get a fair trial due to critical errors including the destruction and suppression of evidence the state has set nine
Execution dates for glossip and just days before he was again scheduled to be executed in May the Supreme Court blocked his execution and this Monday decided to review his case my guest is John Bloom the director of the Cornell Law death penalty project how unusual is
It for this Supreme Court to Grant a stay of execution well this is a court that has been in general hostile to death inmates so they’ve been reluctant to Grant review in capital cases and have been hesitant to enter stage of execution and most of their work has
Been vacating stage of execution which have been entered by lower courts so why do you think they took this case most likely the court took glossip’s case because it had the extremely unusual feature of the Attorney General of the relevant State here Oklahoma agreeing with glossup that he was denied the
Right to a fair trial and the Supreme Court should intercede explain the circumstances and why the Attorney General came to that conclusion and independent investigations came to that conclusion yes for years have been a number of questions raised about clups and his innocence and new evidence has resurfaced casting light on the The
Credibility of the main person that testified against him in this particular case and then there was some additional evidence discovered by the prosecution and disclosed to the defense which has formed the basis of this most recent appeal and there have been several independent commissions both of which have found serious problems with the
Fairness and the constitutionality of his trial and so after reviewing all that evidence the Attorney General concluded that he should get a new trial did prosecutors withhold a box of documents this whole time and just turned it over to the defense recently yes it’s been referred to in the press
As box 8 but yes they found a box of materials which cast further doubt and corroborated some of the suspicions that people had about the main witness a person named sne credibility in this particular case indicating that he’d been significantly coached in his testimony that he was under the
Influence of some powerful drugs and had psychiatric problems and so after reviewing all that the Attorney General in Oklahoma said yes I think this person should get a fair trial the Oklahoma Court of Criminal Appeals said no but I think the unique feature of this is that
The judgment is not being defended by the Attorney General of the state of Oklahoma they are confessing that there was constitutional error in glossip’s case as you mentioned the Oklahoma appeals court upheld his conviction and the Court ruling noted that the Attorney General said he was not suggesting
Glossip is Innocent but only that Justice would not be served by executing him was that the main reason they didn’t overturn the case I mean I think the main reason they didn’t overturn the case at least according to what they said is they didn’t feel like this new
Evidence met the legal standard in Oklahoma to file a second petition I don’t really understand that under their own rules it would seem that this type of persuasive showing of Innocence would satisfy the standard to have a second postc conviction relief Hearing in Mr glossip’s case but the Oklahom cor pill
You know said no and that again is is unusual and that’s probably why the Supreme Court took it and the state’s pardon and Parole Board deadlocked in a vote to even Grant him clemency yes I understand they didn’t have the full panel but the people that were there
Deadlocked on whether to grant clemency or not do you understand why the Attorney General thinks that this was a miscarriage of justice and yet he still believes in glossip’s guilt I think that’s really a mischaracterization of what he said I think what he has said is I’m not persuaded that glossip is
Innocent but I am persuaded that the trial itself which produced his convictions and death sentences was not reliable because of the fact that the jury didn’t hear all the evidence and that’s a little different from saying I don’t think he’s innocent I think he’s saying I don’t know whether he’s
Innocent or not there’s been questions raised about his innocence I’m not saying that he is but I am saying this trial wasn’t sufficiently reliable to produce an outcome which I’m comfortable allowing this person to be executed Okay I accept that distinction so now Oklahoma set nine execution dates for
Him and he’s been just hours away from being executed three times how do you think he’s managed to survive through all those execution dates when you know other inmates on death row are not so able I think there’s two primary reasons which aren’t necessarily mutually
Exclusive one is that he’s had a lot of very good lawyers working very hard to save his life over the years and two he’s you know been fortunate been lucky in some respects that this has been stayed and often that’s what it takes right people working really hard and and
A little bit of luck thrown in the Supreme Court did consider his case once before although not the merits of it explain why one of his execution dates was set aside by the justices in 2015 yes there was a previously a challenge to the execution methods in this case
And part of that and whether he could be executed humanely under lethal injection so it didn’t deal with this question whether there’s a pervasive showing of Ven sufficient to Warrant a new evidentiary hearing or some new proceeding so they look at different issues the Supreme Court had been
Weighing his appeal since late September do you have any indication or do you have any suspicions about why the delay in acting it’s not that I don’t want to say it’s that typical but it’s not uncommon for a case to be the technical term is relisted the conference and
Relisted other the court talks about it and then they don’t do anything and then it comes back and relisted sometimes that means that they are trying to look more deeply at the record sometimes it means someone is going to dissent or write an opinion uh sometimes it means
There’s going to be a pruum reversal in other words they’re going to just go ahead and reverse it on the pleadings without doing it and in this case they just sat on it and decided to look at the miror stocket so I mean there’s a
Lot to go through in this case and I think it just is a further indication that the court was troubled by this and I think it’s unlikely they took it to say yeah we’re going to let you execute him usually when they take a case in this posture they’re taking it to
Reverse wasn’t there a similar situation to glossup a year ago and the justices ordered a Texas appeals court to look at the case again and it was a death row inmate who had the backing of prosecutors as well yes I mean this is not completely unique situation but it’s
Virtually unprecedented in many ways and in this case you have not only the Attorney General a lot of very conservative lawmakers in Oklahoma are also coming forward supporting glossup and just saying we shouldn’t execute him at this time so it’s a very I think the fact that he has a lot of people
Supporting him who are not what you would generally call The Usual Suspects is part of what makes this case stand out and probably explains the Supreme Court’s decision to review it well it’s gotten national attention there’s been a documentary and Susan Sarandon brought attention to it Kim Kardashian urged her
Social media followers to contact the parole board so he’s gotten more attention than most death row inmates that is true and credible showings of Innocence tend to do that what is the question the high court is actually going to decide well basically they’ been asked to decide whether the
Prosecution’s failure to disclose this evidence the priv glossip of a fair trial this information wasn’t withheld there’s a Supreme Court decision called Brady versus Marilyn which says prosecutors have a duty under the due process clause to disclose material exculpatory information and the Oklahoma Court of Criminal appeal said this
Didn’t fall into that category uh the C petition says we think it does we won’t use Supreme Court to rule on that and that’s what they’re going to rule upon if the Supreme Court reverses his conviction could he be tried again for the murder yes I mean theoretically yes
The court isn’t in the business of saying no you can’t retry this person again normally what they do is they say there was a problem with this trial we remand it back for proceedings consistent with his opinion I do think given all the evidence which points towards glossip’s innocence here if the
Supreme Court reverses it’s extremely unlikely there will ever be another trial I’d also like to get your reaction to attorney general Merrick Garland’s decision this month to seek the death penalty for the massacre that occurred at a buffalo Supermarket last year after he took office Garland had issued a moratorium on federal
Executions and this is his first approval of a new capital prosecution very disappointing I mean president did run on an anti-death penalty campaign I realize this isn’t the president himself this is the president attorney general so there you know is some Independence in what the Attorney General does versus what the
President does but you know for whatever reason they felt compelled to do this proba maybe because they did it in Pittsburgh you know I I don’t know do you think that even bringing one Capital case diminishes their protestations against the death penalty that’s true I mean I think the
The main lesson one of the reasons the the president said he opposed it was wasn’t persuaded that it could be done fairly in the majority of cases and there’s lots of evidence to support that and it can’t be done any more fairly in the case not mean of course I would
Never say that what happened in Buffalo wasn’t anything but horrific you know it clearly was but still the the death penalty is not going to solve what created that crime what caused that crime and in the end uh isn’t going to bring anyone’s love room back it’s such
A difficult topic thanks so much for sharing your insights with me that’s John Bloom director of the Cornell death penalty project coming up next another face off in federal court over crypto I’m June grao and you’re listening to Bloomberg a hearing in federal court in DC is being closely watched by the
Crypto industry because it could help determine the extent of the sec’s jurisdiction over digital assets if that sounds familiar to you it’s because the same issues were the subject of a hearing in another case last week in Manhattan federal court that was the legal battle between the SEC and
Coinbase this is the legal battle between the SEC and binance these two hearings are about the threshold issue of the definition of a security the sec’s actual case against binance differs from the case against its rival coinbase because it includes allegations of Fraud and Market manipulation in fact last November attorney general Merrick
Garland announced that binance was paying one of the largest corporate penalties in US history 4 3 billion for money laundering binance facilitated billions of dollars of unregulated cryptocurrency transactions it willfully enabled hundreds of millions of dollars in transactions between American users and users subject to us sanctions and its platform accommodated criminals across
The world who use binance to move their stolen funds and other criminal proceeds joining me is Securities Law expert James Park a professor at UCLA law school Jim the SEC has argued that most crypto assets fall under its jurisdiction and are subject to its rules is it taking too broad an approach
I think that the FDC has to think about the limits of its argument what are the limits of its ability to regulate crypto assets and In fairness to the SEC in litigation you are you know trying to advance a position and trying to advance as broad of a position as
Possible and I think that is to some extent reflected in um the positions the SEC has has taken um at the same time as a regulator you have to understand that at some point you have to Define standards that will give some guidance as to the limits of your Authority and I
Think that’s what the SDC has to continue to think about they have to find some limits right for example they have concluded that Bitcoin is not a security and Bitcoin is the most valuable crypto asset that’s out there worth you know almost a trillion dollars if you believe the valuation and the SEC
Is saying we’re not regulating Bitcoin so you know I think that the SEC has set some limits and the question is whether the courts are going to require or Define further limits for the sec’s regulation of crypto assets does the sec’s case against binance differ from its case against coinbase because it in
Includes allegations of Fraud and Market manipulation it is different and I think that the case against bance is more compelling because of those allegations relating to a lack of compliance by The Exchange and regulating questionable transactions and I think that that is ultimately going to make finance an easier case for
The SEC having said that these initial motions to dismiss that have been argued are about certain threshold issues with respect to the definition of a security that are pretty much the same in both the binance and the coinbase cases so there are some you know fundamental similarities about the initial stages of
These cases I expect though that as the litigation moves forward assuming that it does move forward that the SEC will have an easier time in the binance case and the coinbase case so where does this piece fit in binance and its CEO pleaded guilty to justice department charges and
Settle with the cftc and the treasury Department in November with binance paying $4.3 billion and Shang pen Xiao agreeing to step down as CEO does that fit anywhere into this case fits in but indirectly I think my understanding of those charges is they related to compliance with various money laundering
Statutes that require financial institutions to monitor suspicious transactions and binance did not do that now there’s a separate question as to whether or not the binance exchanges are they Securities exchanges and that’s a entirely separate uh issue issue that is being litigated with the secd and I
Expect that the fact that binance is litigating this case seems to indicate that they think that they can continue to do business even with a substantial settlement like the one with the Department of of justice and that they believe that if they can win against the
S that they have a viable business going forward and it also speaks to the amount of Revenue these exchanges have generated that they’re able to afford such a large monetary penalty and still continue doing business so as you mentioned the case hinges on whether the tokens fit within the definition of an
Investment contract so for those who have not been following this crypto debate explain what that means the term the phrase investment contract is listed in the definition of a security in the major federal Securities laws at the very beginning of the statute they have definition right
And one of the key definitions is that of a security and there is a long list and if you ever get a chance to read the definition of a security in the federal Securities Act of 1933 or or Securities Exchange Act of 1934 you won’t really be
Able to make heads or Tales of it it’s it’s a long laundry list and I think that the fact that you have this long list of different types of things that could be Securities evidences and intent by Congress that the definition of security is fairly broad so you have
Included in the definition of a security some standard Securities like a stock a bond Securities we’re all familiar with and then there is this category of investment contract and the meaning of investment contract is not self-evident it’s been defined though in a Supreme Court case that the hoe case and the
Basic essence of it it’s an an investment in a common Enterprise where there is an expectation of profit through the efforts of others that’s a mouthful but it is a broad definition that is meant to capture those financial Arrangements that do not quite fit into the category of stock or Bond but we
Think of as having the fundamental attributes of a security and to try to translate that legal definition into sort of common Concepts I think the basic idea is you’re investing in a business a common Enterprise that is expected to generate profit and you are not the one running the business you are
Somebody who has invested with the expectation that the folks who are running the business are going to generate profits and that is the fundamental essence of a security and the SEC has maintained that some crypto assets are essentially like an investment in a type of business that is
Expected or hopes to generate profit and that’s why investors are buying these crypto assets let’s look at the arguments from both sides in the case so an attorney for binance said that the company had no obligations to investors after selling certain tokens which would need to be the case if the assets were
To be consider Ed Securities that’s essentially trying to say it’s not a contract and they are really focusing in on the plain meaning of investment contract we need some sort of a contract between the investor um and the common Enterprise and they maintain that there
Is no such contract I think there are a couple of uh responses one can make to that argument the first is that you know to have a contract it’s an agreement it’s an agreement and it doesn’t have to be written down and so long as there is a expectation between the investor and
The Enterprise that the Enterprise is working to increase the value of the crypto asset one could argue that that uh element of an agreement has been satisfied now I think binance would say well you need something more than that because you know there’s nothing that says if I’m an investor in crypto assets
And the founder of the project they basically just take the money and don’t do anything with it they don’t make any efforts to uh create a network that is valuable um if that happens the person who buys the crypto asset has no recourse they have no ability to sort of
Sue and inforce some obligation that may or may not be technically true um it’s it’s a dangerous argument I think for binance and the crypto industry though because you know why would I buy a crypto asset if the people who raise money by selling tokens take the money
And do whatever they want with it they don’t use the money to build a valuable system that’s going to increase the value of my crypto asset I think there is an understanding there or there should be that um if I buy a crypto asset from a venture where they
Represent that they’re going to use the funds to build a valuable decentralized Network that’s going to increase the value of my crypto asset I I believe most investors knowledgeable investors would have an expectation that they will use that money and use it in a way that potentially results in in profits and so
I think that’s essentially what the SEC has concluded I was going to say that sounds like the argument from the attorney for the SEC that marketing efforts by binance to promote its tokens suggest that investors expect a profit as they would when investing in Securities is that about the same
Argument it is it is I think the fact that they are representing to the crypto asset holders that they are going to do this uh they are making these sorts of statements and representations whether you think that creates a formal contract or not there is some understanding there there is
Some understanding there whether it rises to the level of a contract I think is a complicated issue but there’s an expectation and because the Supreme Court has read howwi we fairly broadly in the past that I think that even if there is not a formal enforcable contract there the SEC has an argument
That you know it’s not crazy for the investor to think that there is a obligation on the part of those who have sold the tokens to use that to build something that is valuable and Jim are these arguments similar to the arguments that coinbase made last week and other
Crypto platforms have made in the past they are very similar they’re very similar the same argument essentially has been made by both coinbase and binance and even in Prior cases Ripple and and terraform the major arguments have been the same which indicates to me that some of the best legal Minds in the
Country have come to the conclusion that this is the best hope for the crypto industry to avoid classification as security coming up next on the Bloomberg law show I’ll continue this conversation with UCLA law professor James Park and we’ll talk about the confusion in the courts over crypto I’m June grao and
You’re listening to Bloomberg binance and the Securities and Exchange Commission faced off in federal court in DC it’s the second closely watched courtroom battle in less than a week that could help Define the sec’s jurisdiction over the crypto sector I’ve been talking to UCLA law professor James
Park Judge Amy Burman Jackson said the SEC seems to be saying that all digital assets are securities she asked how are the issuers supposed to know when they cross the line but hasn’t the SEC said it doesn’t have jurisdiction over Bitcoin Bitcoin is not a security and I think that she’s probing the
FDC and trying to get it to take a firmer position on what the limits are and I think part of what she would like to do as a judge in her opinion is to give litigant some indication of where the limits of how we might be it might
Be troubling to have a test that is so undefined that the only way we know whether something is a security is because the SDC takes the position that it is a security that is not ideal um at the same time it may not be possible to Define
Clearly what the limits of how we are and so I’m not sure exactly what judge Jackson is getting yet there are a number of possibilities one possibility is that she is really skeptical of the sec’s position and thinks it is really broad the other possibility is he
Recognizes that that this is a vague test but is really trying to get the sec’s assistance in thinking about how how he could be limited in some way um to what extent can we provide the industry with some notice as to where the line is where is the line between
Something that’s a security that is an investment contract and something that is not you know the SEC has tried to give some guidance but I think that in the closer cases the line is very blurry the line is very blurry if you are getting into digital assets that are
Close to the line between something that is an investment contract and something that is not yeah the judge wanted the SEC to Define a boundary for what it considered a security in regard to Virtual tokens and lawyers for the SEC said the test is designed to be flexible
And that there is no bright line to make the distinction and that’s true of a lot of tests in the law right that there’s no bright line that is true that is something true in many areas of the law when you’re trying to Define you know something like negligence or intent it
Really depends on a close examin of the fact um I think the reason why the crypto asset industry is frustrated though by this approach is that if you’re going to build an industry if you’re going to you know create a ecosystem of digital assets the entrepreneurs who are starting these
Projects they want a certain amount of certainty they want a certain amount of certainty as to when they will be regulated when they will not be unfortunately I’m not not sure that that certainty is is possible I’m not sure that it is possible um and that is
Something that you know we’ll we’ll see what the judges say whether or not that it is permissible to lead the State of Affairs as it is or whether some judges may feel like maybe we should rule against the SEC in some of these cases and Define the limits for them and you
Know I think that’s certainly a possible outcome in some of these cases and bance was pushing that this implicates the major questions Doctrine which involves agency interpretation in matters of great economic or political significance just as coinbase did last week and this judge like judge P last week seemed to
Dismiss that yeah I think that’s that’s interesting um maybe not entirely unexpected you know it is a doctrine that has some potential but the the sort of application of of it is unclear and I think both judges may have uh concluded that you know the crypto asset industry
Is not large enough to implicate the mar the major questions Doctrine and it’s interesting that both judges seem to have come to that conclusion independently and um this may also be a significant decision in that it begins to set some limits to that major questions Doctrine and I think that you
Know that’s that’s something that um is notable but in my view maybe not not all that surprising as we’ve discussed before courts have been divided on this issue of whether digital tokens are security subject to SEC oversight and I’ve mentioned this before but two Manhattan federal judges whose
Courtrooms are just one floor apart in the federal courthouse here came to different conclusions now this case is in DC and the three other cases over cryptocurrency were in Manhattan the second circuit which Justice Harry Blackman called the mother Court of Securities Law is there more weight put on Manhattan federal court judges
Decisions as opposed to a DC federal court I mean if there are conflicting decisions where would the greatest Reliance be placed it’s a it’s a great question they’re both very good courts very good judges strong traditions and and I think it’s good that we are getting some decisions
Outside of the southern district of New York the mother court because I think that it’s it’s good for as many judges as possible to weigh in on these issues because if we begin to see certain patterns in their decision-making then that can indicate there’s a consensus
About what the law is um I think the the advantage the southern district of New York has um is the volume of cases relating to sec Securities that the judges here and that gives them um an ability to build up some expertise I think that because of the
Location of the southern district of New York the pool of attorneys who end up becoming uh federal district court judges include many individuals who have experience working with Securities or corporate law types of issues so they are very knowledgeable and I think that you know the advantage the southern
District of New York may have is that if you have multiple cases in in the district then you will have multiple decisions that can provide some some guidance as to what the parameters of the law is and then eventually some of these cases will go up to the US court
Of appeals for the second circuit which is also arguably the preeminent pellet court for uh deciding Securities Law La issues and so there is a developed body of law in the second circuit that district court judges are both uh using to guide their decisions and also influencing through their own decisions
There may be a little bit less of that in the DC circuit um simply because of the makeup of cases may be more relating to government agencies uh and uh administrative law but they still do get a good number of significant Securities Law cases as well so I think that that
Decision will also be influential so binance is the second courtroom battle over the same issue in less than a week how many more of these cases are in the offing you know these are probably going to be the major on I think that you have other cases tending terraform and ripple
I think these four cases are probably going to define the scope of what is a security you could potentially see some other cases rise up as well as we see additional enforcement the question is whether or not there will be incentives to litigate those cases um and whether
There’ll be resources will there be resources to fully litigate cases involving say individual defendants who are charged with insider trading on crypto assets there may be there may not be I think the thing that distinguishes this group of four cases is that these defendants have the resources to hire
Top-notch attorneys who can make very sophisticated uh well developed arguments and litigate potentially all the way up to the US Supreme Court and I don’t really see all that many other cases having that sort of staying power but I could be wrong are any of these cases close to the appell court level
Yet not yet and I think you know if I had to bet I think the one that may make it up first maybe the terraform case I believe judge ROV granted summary judgment back in December and so I think that could fairly soon be in a stage
Where it’s in a final judgment that could be appealed to the second circuit and Jim one thing I want to mention is these oral arguments were incredibly long four hours you know these oral arguments were very long the binance and coinbase and I I Comm both judges for
Taking the time to give both sides the time to argue extensively um these are Judges that are trying to get things right on a very complicated issue um they’re also very busy judges they may have hundreds of other cases on their docket um it’s very unusual to give you
Know a block of four hours to oral arguments but I think the fact that they did will lend some additional legitimacy to the decisions they end up making I think it’s it’s great to have these very talented judges you know listening to the arguments of what are some very
Talented attorneys to try to get things right it’s going to be interesting to compare the conclusions these judges come to on this question that’s so important to the crypto industry and to the SEC and we discussed before the record penalty that binance paid and its chief executive Shang Pang Xiao had
Pleaded guilty as well and agreed to step down as CEO his sentencing is coming up in February and for the second time a judge denied his request for permission to travel back home to the UAE while he awaits sentencing even though he offered to post a bond of $175
Million secured by 15 million in cash of course he has a net worth of more than 37 billion so maybe the judge was taking that into consideration thing that may concern the the judge judge is that there’s some allegations that bance was somewhat intentional in trying
To aade US law and to the extent that that’s the case you have you know a a person who may be able to go pretty much anywhere and I may have a mentality that you know as long as I can avoid US law I have no moral obligation to come back
And comply with I think that that’s what makes the judge a little bit uncomfortable in addition to the vast resources that the CEO has it is crazy money it is that’s what makes it so unprecedented and and interesting because you know typically the investment contract cases that seen in
The past they involved fairly small time schemes maybe involving a few million dollars here and there when you’re getting into you know digital assets worth billions potentially that really changes the nature of the game it certainly seems to thanks so much Jim that’s Professor James Park of UCLA law
School and that’s it for this edition of the Bloomberg law podcast remember you can always get the latest legal news by subscribing and listening to the show on Apple podcast Spotify and at bloomberg.com podcast law I’m June Gro and this is Bloomberg
