# Trump vs Law Firms & Short-Seller Andrew Left's Trial

An episode of [Bloomberg Law](https://invisiblenetwork.ai/podcast/277975394), 15 May 2026, 29 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7c892d84-801f-4c0b-b0e9-ae2b0012ff5f/2ee9519c-7fb4-4427-80da-b44b0032fda2/audio.mp3?utm_source=Podcast&in_playlist=91224201-26a6-429d-ac3c-ae2b0012ff6d

Former federal prosecutor James Pearce, senior counsel at Washington Litigation Group, discusses oral arguments at the DC Circuit over President Trump’s executive orders targeting four law firms. Then securities law expert James Park, a professor at UCLA Law School, discusses the prosecution of shortseller Andrew Left. June Grasso hosts. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
[0:08] Speaker 2: If you're counting, the score is law firms four, Trump
[0:13] Speaker 2: Administration zero. You might remember President Trump's executive orders punishing
[0:19] Speaker 2: four law firms with connections to his perceived political enemies,
[0:24] Speaker 2: trying to restrict their lawyer's access to government buildings, to
[0:29] Speaker 2: cancel their client's government contracts, and to revoke their lawyer's
[0:33] Speaker 2: security clearances. Four lower courts struck down the orders as unconstitutional,
[0:40] Speaker 2: and if today's oral arguments at the DC Circuit are
[0:44] Speaker 2: any indication, the federal appeals court will hand another win
[0:48] Speaker 2: to the law firms. My guest is former federal prosecutor
[0:52] Speaker 2: James Pierce, senior counsel at the Washington Litigation Group. What's
[0:57] Speaker 2: at stake in this case before the DC Circuit Court,
[1:01] Speaker 2: I mean.
[1:01] Speaker 1: I think, concisely put, it was whether the current administration
[1:06] Speaker 1: could attack law firms, essentially retaliate against law firms based
[1:12] Speaker 1: on the president's conclusion that those law firms had almost
[1:16] Speaker 1: provided safe harbor to individuals the president considered to be
[1:19] Speaker 1: his adversaries. And so beyond that, beyond just the four
[1:23] Speaker 1: law firms involved, I think there were a much broader
[1:26] Speaker 1: concern about the chilling effect on the legal profession, and
[1:29] Speaker 1: then even beyond the idea of the legal profession, as
[1:32] Speaker 1: one of the briefs in the case I think squarely
[1:34] Speaker 1: tied up the ability of courts to get the best,
[1:38] Speaker 1: most zealous advocacy that they could in court cases, which
[1:41] Speaker 1: of course affects all of us who may at some
[1:43] Speaker 1: point in our lives need legal representation.
[1:46] Speaker 2: Was the law firms argument essentially based on the First Amendment.
[1:50] Speaker 1: Yes, I mean there's a little bit of a coveyat
[1:53] Speaker 1: I should provide here. The law firms argument was that
[1:57] Speaker 1: these executive orders targeted them in violation of the First
[2:01] Speaker 1: Amendment as well the six Amendment, which provides a right
[2:03] Speaker 1: to council and separation of powers concerns. The focus of
[2:08] Speaker 1: the argument today was actually not as much on a
[2:12] Speaker 1: lot of the parts of the executive orders that restricted
[2:15] Speaker 1: access to federal contracting or access to federal buildings. A
[2:19] Speaker 1: lot of it was on the stripping of security clearances,
[2:23] Speaker 1: which again is that I think a consequence of First
[2:26] Speaker 1: Amendment retaliatory targeting. But there was a lot of question
[2:29] Speaker 1: about what role, if any, do courts have in reviewing
[2:33] Speaker 1: sort of a justiciability question reviewing a president's determination of
[2:37] Speaker 1: whether individuals should get access to or should hold security clearances.
[2:41] Speaker 2: The law firms were represented by Paul Clement, former Solicitor General.
[2:45] Speaker 2: I mean, what was his basic argument and how was
[2:48] Speaker 2: it received.
[2:49] Speaker 1: He began his argument by making what I thought was
[2:52] Speaker 1: the rhetorically powerful point that the executive orders violate quote,
[2:56] Speaker 1: the better part of the Bill of Rights, alluding to
[2:59] Speaker 1: what I have already mentioned, the First Amendment, the sixth Amendment,
[3:03] Speaker 1: right to counsel, separation of powers. And there weren't a
[3:05] Speaker 1: lot of questions until towards the end of his argument
[3:08] Speaker 1: because a lot of the focus was on the operation
[3:11] Speaker 1: of security clearances, again, which I actually took to be
[3:14] Speaker 1: a good sign for Paul Clement and for the law
[3:17] Speaker 1: firms that he's representing, because it suggests to me that
[3:20] Speaker 1: the appellate judges had many of the same reservations that
[3:24] Speaker 1: led the district court judges to rule for the law firms.
[3:27] Speaker 1: But we're focusing on a much more narrow question, which
[3:29] Speaker 1: is this security clearance question doesn't mean for sure that
[3:32] Speaker 1: the panel will rule for the law firms. But if
[3:34] Speaker 1: I were the law firms, and if I were Paul Clement,
[3:37] Speaker 1: I would feel pretty good coming out of the argument today.
[3:39] Speaker 2: What was the government's response, And when it comes to
[3:43] Speaker 2: national security, isn't that usually an executive branch function?
[3:49] Speaker 1: Yes, So the government had consistently said, the determination of
[3:53] Speaker 1: whether any individuals, let alone whether they're lawyers at a
[3:56] Speaker 1: law firm, of whether that individual can hold a security
[4:00] Speaker 1: clearance is a decision that is entrusted entirely to the
[4:03] Speaker 1: executive branch, and more specifically to the president. And the
[4:06] Speaker 1: president can do that for whatever reason, or frankly, for
[4:09] Speaker 1: no reason at all. And they were hypotheticals that the
[4:11] Speaker 1: government got that were things like, look if the president said,
[4:15] Speaker 1: I don't trust Chinese Americans, Asian Americans, African Americans, and
[4:20] Speaker 1: even though I don't think that these individuals would jeopardize
[4:24] Speaker 1: classified information, I just don't like them, and therefore I
[4:27] Speaker 1: determined they cannot have security clearances. Could courts really have
[4:30] Speaker 1: no way to get involved? And the government's answer was yes,
[4:34] Speaker 1: courts have nothing to say there because questions of national
[4:38] Speaker 1: security are entirely entrusted to the president. Now that's I
[4:43] Speaker 1: think a quite troubling answer for a lot of reasons,
[4:45] Speaker 1: and one that Paul Clement pushed back on. But at
[4:49] Speaker 1: the end of the day, the government had very little
[4:51] Speaker 1: to say on a lot of the other parts of
[4:53] Speaker 1: the executive order, like again the restrictions on federal contracting,
[4:57] Speaker 1: the restrictions on access to federal buildings. There was a
[5:00] Speaker 1: brief argument to say, look, law firms are just involved
[5:03] Speaker 1: in business and business type of relationships don't implicate the
[5:06] Speaker 1: First Amendment, but that occupied a very small part of
[5:09] Speaker 1: the government's argument today in its brief and candidly, I
[5:13] Speaker 1: don't think the government quite had its heart in it,
[5:15] Speaker 1: and I would not expect it's to prevail on those grounds.
[5:18] Speaker 2: Was there a question of whether the executive orders were
[5:21] Speaker 2: retaliatory in nature.
[5:23] Speaker 1: The government didn't outright concede that the orders were retaliatory.
[5:28] Speaker 1: And the way this sort of took shape in terms
[5:30] Speaker 1: of how the case was argued is that the executive
[5:32] Speaker 1: orders consisted of five sections, and the first section of
[5:36] Speaker 1: each of the orders, that there were four orders against
[5:38] Speaker 1: the four different law firms, was basically kind of the
[5:41] Speaker 1: setting out of the purpose of why that particular law
[5:44] Speaker 1: firm had come into focus for the executive branch and
[5:48] Speaker 1: for the president. You know, whether it was associations with
[5:51] Speaker 1: Robert Muller or Andrew Weissman or other individuals deemed political adversaries,
[5:56] Speaker 1: and there was some jousting about whether the hearts of
[6:00] Speaker 1: the executive order that did things like strip security clearances
[6:03] Speaker 1: and limit access should or could be read without reference
[6:06] Speaker 1: to that first section, the section that kind of laid
[6:09] Speaker 1: out what was It's hard to see anything other than
[6:12] Speaker 1: a retaliatory focus, and so the government was arguing that
[6:16] Speaker 1: the courts should sever it out, should consider it, which
[6:20] Speaker 1: again is not an explicit concession that it was retaliatory,
[6:23] Speaker 1: but I think there were certainly the acknowledgment or the
[6:25] Speaker 1: recognition underneath it, and the district courts had all consistently
[6:29] Speaker 1: found that these were retaliatory orders and that the first
[6:31] Speaker 1: section of the executive orders in each of them.
[6:33] Speaker 2: The law firms won all four cases in the lower courts.
[6:38] Speaker 1: Yes, that's right, Wilmer, Hale, Perkins, Cooey, Susman, Godfried, and
[6:42] Speaker 1: gener and Block. Four different judges all in the District
[6:45] Speaker 1: of Columbia. Slight differences in the nature of the injunctions
[6:50] Speaker 1: blocking the executive orders, but the law firms prevailed in
[6:53] Speaker 1: all four of those cases.
[6:54] Speaker 2: Having lost four times. Did the Justice Department change its
[6:58] Speaker 2: argument in any way from the lower court arguments?
[7:02] Speaker 1: The short answers know, there was certainly a change in
[7:04] Speaker 1: how they emphasized or really what they emphasized. As I mentioned,
[7:08] Speaker 1: I think already they really placed a lot more emphasis
[7:10] Speaker 1: on security clearances when the case was up on an appeal.
[7:14] Speaker 1: And then, as you may know, the government noticed an appeal,
[7:17] Speaker 1: and then shortly before its appellate brief was due it
[7:21] Speaker 1: had to file the first brief. As the party lodging
[7:24] Speaker 1: the appeal, it actually moved filed a motion to dismiss
[7:26] Speaker 1: the appeal, to say it was abandoning its arguments. And
[7:29] Speaker 1: then maybe a day or two later, and with some
[7:31] Speaker 1: public statements potentially brought the President and others in the
[7:35] Speaker 1: White House I think may be Stephen Miller, the government
[7:37] Speaker 1: reverse course and said, no, no, just kidding, we actually
[7:39] Speaker 1: do on an appeal, which is extremely unusual. I spent
[7:42] Speaker 1: over a decade in the Justice Department, and I've never
[7:45] Speaker 1: never heard of anything like that or had colleagues that
[7:48] Speaker 1: I had spoken with. So to me, that suggested a
[7:51] Speaker 1: real lukewarm approach to this appeal. And as I said,
[7:56] Speaker 1: no real change in the substance, but some change in
[7:58] Speaker 1: the emphasis of the.
[7:59] Speaker 2: Arguments practice speak. If an administration cuts off security clearance
[8:03] Speaker 2: of someone, I mean, are there procedures they have to follow.
[8:08] Speaker 1: Another case argued today of a specific lawyer, an individual
[8:12] Speaker 1: named Mark Zaid whose security clearance was revoked and he
[8:17] Speaker 1: was arguing that that too was unlawful, and he prevailed
[8:20] Speaker 1: in front of a district court. I only got a
[8:22] Speaker 1: chance to hear some of that argument, but channeling some
[8:24] Speaker 1: of what came out during the law firms argument, the
[8:27] Speaker 1: judges were more skeptical of kind of a blanket suspension
[8:33] Speaker 1: of security clearances on the basis of association, and that also,
[8:37] Speaker 1: I think led to the hypotheticals about for all Asian
[8:40] Speaker 1: Americans right, but for individualized treatment or individualized assessment. The government,
[8:47] Speaker 1: in its argument today and in the briefs have talked
[8:49] Speaker 1: about how there's a thirteen factor test that is tip
[8:52] Speaker 1: in the ordinary process is considered you know, sort of trustworthiness,
[8:55] Speaker 1: other aspects. So there is a process. It's a bit
[8:58] Speaker 1: of an open question in the Mark Ai case, will
[9:01] Speaker 1: I think, certainly go some ways towards resolving the extent
[9:04] Speaker 1: to which courts ken second guess an executive branch determination
[9:08] Speaker 1: that is done on a at least putatively individualized basis.
[9:12] Speaker 2: The panel consisted of two Obama appointees and one Trump appointee.
[9:17] Speaker 2: Did it seem like the Trump appointee was more receptive
[9:21] Speaker 2: to the government's arguments, not on.
[9:24] Speaker 1: The overall outcome, I mean my sense coming out of
[9:27] Speaker 1: the argument. So there were the three judges, Chief Judge Schwinavasen,
[9:31] Speaker 1: Judge Pillard, and then Judge Raw. Judge Row being an
[9:35] Speaker 1: appointee of President Trump from his first administration, and Judge
[9:40] Speaker 1: Row did raise some questions about the scope of Paul
[9:45] Speaker 1: Clement's arguments because he was arguing that anytime there's a
[9:50] Speaker 1: non individualized determination of security clearances, it should be justiciable,
[9:55] Speaker 1: and I think Judge Row was pushing back on that
[9:57] Speaker 1: in some respects. And in another point, Judge Row asked
[10:01] Speaker 1: the government, if we disagree with you on your top
[10:04] Speaker 1: line position that the security clearances or the other provisions
[10:08] Speaker 1: can be decided by court, you didn't raise any challenge
[10:10] Speaker 1: about the scope of the injunction, which to me suggested
[10:13] Speaker 1: Judge Row may have thought the district courts went a
[10:15] Speaker 1: bit too far in what they disallowed. The Executive branch
[10:20] Speaker 1: to do. But then Judge Row quickly followed up and said,
[10:22] Speaker 1: but Government, I don't see anywhere in your brief that
[10:25] Speaker 1: you have addressed that. And Judge Row, in other cases
[10:28] Speaker 1: I think has been more favorable towards the current administration.
[10:32] Speaker 1: I didn't read her, or or understand her to be
[10:34] Speaker 1: pressing those arguments than the way she has in the past.
[10:37] Speaker 1: So I'd be surprised if she might write separately on
[10:40] Speaker 1: sort of some particular points. But coming out of argument,
[10:43] Speaker 1: I would be surprised if she broke from the other
[10:45] Speaker 1: two who did seem quite skeptical of the government's position.
[10:48] Speaker 2: So you came away with a definite feeling that the
[10:52] Speaker 2: government is going to lose again here.
[10:54] Speaker 1: I did come out with that feeling. I could see,
[10:56] Speaker 1: as I said, Judge Row writing separately on some particular points.
[11:00] Speaker 1: Actually think that there's a good chance that all three
[11:02] Speaker 1: of them end up voting to uphold the District Court's
[11:05] Speaker 1: rulings for the law firms.
[11:06] Speaker 2: Thanks so much for joining me today. That's James Pierce
[11:10] Speaker 2: of the Washington Litigation Group coming up next on the
[11:13] Speaker 2: Bloomberg Law Show. A prominent player in the world of
[11:17] Speaker 2: short selling, activists is on trial in Los Angeles for
[11:21] Speaker 2: market manipulation. I'm June Grasso and this is Bloomberg. Andrew
[11:28] Speaker 2: Left is one of the most prominent players in the
[11:31] Speaker 2: world of short selling activists, sometimes called the bounty hunter
[11:36] Speaker 2: of Wall Street, with his viral posts and reports, often
[11:40] Speaker 2: claiming firms are overvalued or engaged in fraud, and hyping
[11:45] Speaker 2: his positions with frequent appearances on financial TV shows. But
[11:49] Speaker 2: now Left is appearing in a courtroom in Los Angeles
[11:54] Speaker 2: where he's being tried for using explosive social media posts
[11:58] Speaker 2: about dozens of companies to illegally move their stock and
[12:02] Speaker 2: make a quick profit. The fifty five year old denies
[12:06] Speaker 2: misleading investors. My guest is securities law expert James Park,
[12:10] Speaker 2: a professor at UCLA Law School. Jim, give us a
[12:14] Speaker 2: picture of who Andrew Left is.
[12:17] Speaker 3: He started out by publishing research reports on companies through
[12:21] Speaker 3: his platform Citrin Research, often making negative recommendations. I think
[12:27] Speaker 3: he's mainly known for correctly identifying problems at a company
[12:31] Speaker 3: called Valiant Pharmaceuticals that you may remember from a while ago,
[12:36] Speaker 3: a company that engaged in questionable practices with respect to
[12:40] Speaker 3: recognizing sales and so you know, he published a report
[12:44] Speaker 3: identifying some of the questionable practices. He also came up,
[12:48] Speaker 3: interestingly in the game Stop Saga from a few years ago,
[12:52] Speaker 3: where he had taken a short position I believe in
[12:55] Speaker 3: the company and retail investors basically rallied on Red to
[13:00] Speaker 3: squeeze the shorts. And so those are a couple places
[13:03] Speaker 3: where he's come up, and you know, with those successes,
[13:06] Speaker 3: he's gained a high profile. You know, he makes recommendations
[13:11] Speaker 3: with respect to companies, emails them out, has an online
[13:15] Speaker 3: platform as using social media a lot, is frequently invited
[13:19] Speaker 3: on various shows, and has a lot of medium appearances.
[13:23] Speaker 3: And so he's somebody with a higher profile than most
[13:26] Speaker 3: folks who are doing research and you know, taking short
[13:30] Speaker 3: positions potentially in companies.
[13:33] Speaker 2: The government is accusing him of manipulating the stock market.
[13:37] Speaker 2: Tell us about the charges here.
[13:39] Speaker 3: He was indicted for various counts of securities fraud, manipulation
[13:43] Speaker 3: and fraud. More generally, the manipulation argument is that he
[13:48] Speaker 3: would basically establish positions in a stock whether it was
[13:52] Speaker 3: long or short, issue a recommendation with respect to that position,
[13:58] Speaker 3: which he would disseminate to the public, presumably according to
[14:04] Speaker 3: the prosecutors with the intent to either inflate or deflate
[14:08] Speaker 3: the stock given his high profile, and then he would
[14:11] Speaker 3: quickly reverse his position. And I think the argument there
[14:15] Speaker 3: is that that shows he did not believe his recommendation,
[14:19] Speaker 3: that he was issuing these recommendations to artificially manipulate the
[14:25] Speaker 3: price of these stocks, and that his actions, which often
[14:30] Speaker 3: came very soon after the recommendation, indicated that he did
[14:34] Speaker 3: not sincerely believe, you know, his recommendation that you should
[14:38] Speaker 3: buy the stock or sell the stock, because he was
[14:40] Speaker 3: doing the reverse. And you know, there might have been
[14:43] Speaker 3: a dozen or so of these transactions, maybe more that
[14:47] Speaker 3: the prosecutors alleged he profited by around twenty million dollars
[14:51] Speaker 3: through this market manipulation.
[14:53] Speaker 2: So the opening statements, the prosecutor said he said whatever
[14:57] Speaker 2: he had to, whether it was accurate or not, to
[14:59] Speaker 2: get a mo market reaction, because that's what he was
[15:02] Speaker 2: looking for, to generate a market reaction, to generate panic,
[15:06] Speaker 2: Whereas Left's attorney said that he genuinely believed in his
[15:10] Speaker 2: stock calls quote, he tells the public what he believes
[15:13] Speaker 2: the truth, and then he trades on the truth to
[15:16] Speaker 2: make a profit. It's not fraud, that's trading. I mean,
[15:20] Speaker 2: does the prosecution have to prove that he didn't believe
[15:23] Speaker 2: what he was saying or more than.
[15:25] Speaker 3: That, I think that's fair that he didn't believe his opinions,
[15:29] Speaker 3: the opinions that he issued. Opinions can be false. That
[15:33] Speaker 3: if you do not believe in the opinion, then it's
[15:35] Speaker 3: it's false, and that can be the basis for securities
[15:40] Speaker 3: fraud claim. And you know, I think that's essentially what
[15:44] Speaker 3: the prosecution has to show with a high level of certainty,
[15:48] Speaker 3: because it is a criminal case beyond a reasonable doubt,
[15:52] Speaker 3: that you know, he intentionally issued information that he knew
[15:57] Speaker 3: was not true and he was doing that with the
[15:59] Speaker 3: motivation into profit. That's basically what the prosecution is going
[16:03] Speaker 3: to have to show at trial.
[16:05] Speaker 2: Is this an aggressive legal theory for the prosecution? Is
[16:09] Speaker 2: it an uphill battle for prosecutors to.
[16:11] Speaker 3: Prove this it's not a commonly prosecuted fact pattern. I
[16:17] Speaker 3: think that's fair to say. You know, do the prosecutors
[16:20] Speaker 3: have a very well developed case? I think they have
[16:23] Speaker 3: a lot of evidence, right, They have a lot of
[16:26] Speaker 3: evidence about not only his recommendations, of course, which are public,
[16:30] Speaker 3: but what he did and there is you know, some
[16:34] Speaker 3: email evidence that could be interpreted in a way that
[16:38] Speaker 3: the jury might be able to conclude that you know,
[16:41] Speaker 3: he knew that the information was false. Now that that's
[16:43] Speaker 3: up to the jury, and emails have a lot of
[16:46] Speaker 3: ways that they can be interpreted.
[16:48] Speaker 1: You know.
[16:49] Speaker 3: Market manipulation cases are are tough, right, It's tough to
[16:53] Speaker 3: prove the intent because a lot of the actions that
[16:58] Speaker 3: could potentially be manipulate relative you know, maybe motivated by
[17:03] Speaker 3: legitimate reason. You know, he may legitimately believe part of
[17:07] Speaker 3: his recommendations, some of his recommendations, you know, maybe he
[17:10] Speaker 3: changed his mind right very soon after. And so, you know,
[17:14] Speaker 3: market manipulation is challenging. We've talked, you know a few
[17:17] Speaker 3: years ago about the Bill Huang case. That's one where
[17:20] Speaker 3: I noted that it's hard to establish manipulation, and the
[17:23] Speaker 3: prosecution did in that case. And so I think that
[17:27] Speaker 3: the cases is novel and interesting because you know, manipulation
[17:32] Speaker 3: is not prosecuted as much as say insider trading, for example.
[17:36] Speaker 3: It's it's a little bit more straightforward. When I've taken
[17:38] Speaker 3: non public information, I'm an insider, I trade on it.
[17:42] Speaker 3: That is usually more straightforward than a situation where somebody
[17:46] Speaker 3: is is engaging in various training activity and around recommendations
[17:51] Speaker 3: that they've issued, And so I think it's just less
[17:54] Speaker 3: common to bring cases like this.
[17:56] Speaker 2: So one of the witnesses for the prosecution was this
[18:00] Speaker 2: CEO of the cannabis company Kronos Group, Mike Gorenstein, and
[18:04] Speaker 2: he testified how Kronos was thrown into chaos after Left's
[18:09] Speaker 2: citron Research published and tweeted a negative report, the tweet
[18:15] Speaker 2: which said Kronos was quote all hype with possible securities fraud.
[18:20] Speaker 2: And then the prosecutor said, shortly after the tweet, around
[18:24] Speaker 2: twenty four minutes, according to the indictment, Left started closing
[18:28] Speaker 2: out his short position. Obviously, Left does not have to
[18:31] Speaker 2: take the stand in his own defense, no defendant does.
[18:35] Speaker 2: But without taking the stand, how will he be able
[18:38] Speaker 2: to explain what was going on there in those twenty
[18:41] Speaker 2: four minutes?
[18:42] Speaker 3: Yeah, I don't know how his operation works, whether he
[18:44] Speaker 3: does all the research himself or whether there's somebody else
[18:47] Speaker 3: who does that. I think that, you know, ideally he
[18:50] Speaker 3: would explain, you know, what was my basis for making
[18:53] Speaker 3: this this statement about this company? What did I look
[18:57] Speaker 3: at and why did I quickly close out the position.
[19:00] Speaker 3: I think that's also a question that could be asked,
[19:04] Speaker 3: and it might be difficult to establish that without the
[19:09] Speaker 3: person who's making the recommendation taking the stand.
[19:13] Speaker 2: Stay with me, Jim. Coming up next on the Bloomberg
[19:15] Speaker 2: Laws Show, I'll continue this conversation with UCLA law professor
[19:19] Speaker 2: James Park. Is this trial a reckoning for short sellers?
[19:24] Speaker 2: I'm June Grosso and you're listening to Bloomberg. A trial
[19:29] Speaker 2: in Los Angeles is putting a spotlight on the short
[19:33] Speaker 2: selling industry. Andrew Left is one of the most prominent
[19:36] Speaker 2: players and is accused of using explosive social media posts
[19:41] Speaker 2: about dozens of companies to illegally move their stock and
[19:45] Speaker 2: make a quick profit. He denies any wrongdoing. I've been
[19:49] Speaker 2: talking to Professor James Park of UCLA Law School. Jim,
[19:53] Speaker 2: I've been reading some headlines that say is short selling
[19:57] Speaker 2: facing a reckoning referring to this trial. Do you think
[20:01] Speaker 2: it is?
[20:01] Speaker 3: I don't think so. You know, some of the transactions
[20:04] Speaker 3: were long positions. Now you know, he is maybe known
[20:09] Speaker 3: as a short seller, but he does make long recommendations
[20:12] Speaker 3: as well. There's a Facebook transaction where he says it's
[20:15] Speaker 3: going to one hundreds of sixty dollars a share, and
[20:17] Speaker 3: he sells out it much much less than that after
[20:20] Speaker 3: the price goes up, and so, you know, you might
[20:23] Speaker 3: think of it as more perhaps a case involving the
[20:27] Speaker 3: use of social media, the use of kind of online recommendations.
[20:32] Speaker 3: Is that the place where you could have a bit
[20:35] Speaker 3: of a chilling effect, And so I think you might
[20:38] Speaker 3: even think of the case a bit broader than it
[20:41] Speaker 3: being about, you know, somebody who is specifically selling companies
[20:45] Speaker 3: short and making allegations that the price should go down.
[20:48] Speaker 3: I think it's a bit broader than that. It is
[20:50] Speaker 3: the combination of you know, do short sellers sometimes use
[20:53] Speaker 3: social media? Sure, I don't know that they do that
[20:56] Speaker 3: to the extent that mister Left did, And that might
[20:59] Speaker 3: be kind of what the case ultimately is about, is
[21:02] Speaker 3: that technology has you know, made it difficult to regulate
[21:06] Speaker 3: conduct that might manipulate markets, because before social media you
[21:10] Speaker 3: couldn't move a stock price like this, But now you know,
[21:13] Speaker 3: there's some individuals who can.
[21:15] Speaker 2: Just the indictment of Left sort of spooked the short
[21:20] Speaker 2: selling industry. His indictment is the culmination of an investigation
[21:26] Speaker 2: of short sellers by criminal prosecutors in DCN Los Angeles.
[21:32] Speaker 2: That started in twenty nineteen, so short sellers were aware
[21:36] Speaker 2: of the prosecutorial scrutiny. Some of Leff's biggest competitors have
[21:40] Speaker 2: already exited the market, some came out with more detailed,
[21:45] Speaker 2: longer disclaimers. Has the industry cleaned itself up a bit?
[21:50] Speaker 3: No, I think it's it's tough being a short seller.
[21:53] Speaker 3: It's always been tough. Nobody likes you. And you know,
[21:55] Speaker 3: there's long been scrutiny of short sellers and their statements.
[21:59] Speaker 3: You know one that in mind. You know, Bill Ackman
[22:01] Speaker 3: years ago, like in the early two thousands, was investigated
[22:05] Speaker 3: by the New York Attorney General's Office and maybe the
[22:08] Speaker 3: SEC about about a report he published about a company
[22:11] Speaker 3: called Mbia. And you know, I think that short sellers
[22:16] Speaker 3: that are sophisticated should know that their statements are going
[22:19] Speaker 3: to be scrutinized and that they cannot release information or
[22:23] Speaker 3: facts that they know are false. That's part of the
[22:26] Speaker 3: business right is that you're violating Rule ten B five
[22:29] Speaker 3: if you issue false information relating to the purchaser sale
[22:33] Speaker 3: of a security. Probably some other state law theories as well,
[22:38] Speaker 3: And so there's always been scrutiny. Taking it to a
[22:42] Speaker 3: criminal level, I think though, does raise some additional reason
[22:47] Speaker 3: to be cautious with these types of statements. So I
[22:50] Speaker 3: think that in that regard, you know, when you have
[22:53] Speaker 3: a criminal case that really gets people's attention. And he
[22:56] Speaker 3: is known primarily as somebody who recommends short positions, has
[22:59] Speaker 3: taken positions. He's an activist investor, and so I think
[23:04] Speaker 3: that's right that it is something that activist short investors
[23:08] Speaker 3: will be aware of.
[23:09] Speaker 2: Prosecutors have focused on the stocks of a few companies
[23:14] Speaker 2: that they say Left tweeted about and then trade it
[23:16] Speaker 2: on the social media site formerly known as Twitter, and
[23:20] Speaker 2: Chronos Group, a cannabis company, and prosecutors have called stock
[23:25] Speaker 2: analysts who disagreed with the negative reports that left issued,
[23:31] Speaker 2: and on cross examination, the defenses point seems to be
[23:34] Speaker 2: that disagreement over stock doesn't necessarily constitute fraud, which is true.
[23:40] Speaker 2: But it's more than disagreement, isn't it. It's whether you misrepresent.
[23:45] Speaker 3: Yeah, I think the analyst recommendation or the analysts testimony
[23:48] Speaker 3: is probably serving as a baseline. You know, this is
[23:51] Speaker 3: kind of the these are the facts that were out there,
[23:55] Speaker 3: and you know, without specific facts kind of contradition that
[24:00] Speaker 3: if you're just kind of saying this stuff without any
[24:04] Speaker 3: basis and you're only doing it to manipulate the stock price,
[24:07] Speaker 3: that that's going to be problematic. So you're right, disagreement
[24:10] Speaker 3: is not broad. People have the ability to disagree. But
[24:14] Speaker 3: I think it shows the context of how the stock
[24:17] Speaker 3: was understood and if you are deliberately issuing false information
[24:22] Speaker 3: that that is essentially what the case is is about.
[24:25] Speaker 3: But the testimony by the stock analyst by itself is
[24:28] Speaker 3: not going to be able to establish that these statements
[24:30] Speaker 3: were false, that he knew that they were false.
[24:33] Speaker 2: This was a prosecution that was brought during the Biden
[24:36] Speaker 2: administration and the Trump administration has dropped a lot of
[24:39] Speaker 2: those and you know, dropped really the concentration on white
[24:43] Speaker 2: collar crime. Is there any reason you think why they
[24:46] Speaker 2: kept this case you and not know the answer, I'm
[24:48] Speaker 2: just like querying.
[24:50] Speaker 3: Yeah, it's a very interesting question, and it's not been
[24:54] Speaker 3: so transparent as to how they're making decisions. That that's
[24:57] Speaker 3: true in any administration, right, prosecutors will make decisions based
[25:00] Speaker 3: upon their evaluation of the case and the evidence involved.
[25:04] Speaker 3: And one possibility is, hey, we think this is a
[25:07] Speaker 3: good case. We think the evidence is strong. We think that,
[25:11] Speaker 3: you know, this is a good case that you know,
[25:13] Speaker 3: and that he should be punished. I think that's one
[25:15] Speaker 3: view of the reason the case is going forward. You know,
[25:19] Speaker 3: is there another view that kind of feeds into the
[25:22] Speaker 3: narrative of well, you know, maybe you know short sellers
[25:26] Speaker 3: are bad for corporate interests or big companies, and so
[25:31] Speaker 3: we might view them unfavorably for some political reason, you know,
[25:36] Speaker 3: Is that somewhere in the background. It could be I
[25:39] Speaker 3: don't really know much. And it's also very possible that
[25:41] Speaker 3: this has just not drawn the attention of the folks
[25:44] Speaker 3: in Washington, that it's it's really a case that the
[25:47] Speaker 3: US Attorney's office here brought and is simply proceeding.
[25:52] Speaker 2: Well, you're here, I want to ask you about another case.
[25:55] Speaker 2: According to Bloomberg sources, US authorities are moving to result
[26:00] Speaker 2: of the fraud chargers against Indian billionaire got Tom A
[26:04] Speaker 2: Donnie and in this criminal case that's hung over his
[26:08] Speaker 2: head for more than a year. A. Donnie is also
[26:11] Speaker 2: in talks over a potential fifteen to twenty million dollars
[26:15] Speaker 2: settlement of a civil fraud case that the securities and
[26:18] Speaker 2: Exchange Commission brought against him and others in November of
[26:23] Speaker 2: twenty twenty four. Again, according to sources, is this just
[26:26] Speaker 2: another white collar case they're dropping.
[26:29] Speaker 3: I think it's fair to say that this administration views
[26:33] Speaker 3: the Foreign corupt Practices Act differently than the last administration.
[26:36] Speaker 3: The Foreign Corrupt Practices Act prohibits publicly traded companies in
[26:40] Speaker 3: the US from paying bribes overseas to get business. And
[26:47] Speaker 3: my understanding of the allegation years that the company was
[26:50] Speaker 3: building some clean energy projects in India paid a lot
[26:54] Speaker 3: of bribes and that was the prosecution for violating the
[26:58] Speaker 3: Foreign corupt Practices Act, as well as some disclosure issues
[27:01] Speaker 3: that you claim to be a socially responsible company, but
[27:05] Speaker 3: you are paying bribes, right, so that's a securities law
[27:08] Speaker 3: violation as well. And you know, I think on both
[27:12] Speaker 3: theories that this administration is just more skeptical about enforcing
[27:17] Speaker 3: the Foreign Corrupt Practices Act. It's you know, it's hard
[27:21] Speaker 3: to define what a bribe is. And you know, some
[27:24] Speaker 3: may say, more broadly, are we disadvantaging companies that you know,
[27:29] Speaker 3: have US ties by not allowing them to compete for
[27:33] Speaker 3: business and foreign jurisdictions? And certainly just sort of the
[27:37] Speaker 3: claim that there is a misrepresentation with respect an ESG
[27:41] Speaker 3: matter is something that this this administration has done a
[27:44] Speaker 3: one to eighty from the last. So I think there
[27:46] Speaker 3: are a lot of reasons why we might speculate that
[27:48] Speaker 3: the case was dropped. And also there may be some
[27:50] Speaker 3: jurisdictional issues in terms of getting personal jurisdiction over some
[27:54] Speaker 3: of the individuals, so and so there may be a
[27:57] Speaker 3: number of reasons.
[27:58] Speaker 2: You may be right about that, because none of the defendants,
[28:01] Speaker 2: including a Donnie and his nephew, have appeared in court
[28:05] Speaker 2: so far over the charges, so the case has been
[28:09] Speaker 2: effectively stalled. Thanks so much for your insights, Jim. That's
[28:13] Speaker 2: Professor James Park of UCLA Law School, and that's it
[28:17] Speaker 2: for this edition of The Bloomberg Law Show. Remember you
[28:20] Speaker 2: can always get the latest legal news on our Bloomberg
[28:22] Speaker 2: Law podcasts. You can find them on Apple Podcasts, Spotify,
[28:26] Speaker 2: and at www dot Bloomberg dot com, Slash podcast, Slash Law,
[28:31] Speaker 2: and remember to tune into The Bloomberg Law Show every
[28:34] Speaker 2: weeknight at ten pm Wall Street Time. I'm Jim Grosso,
[28:38] Speaker 2: and you're listening to Bloomberg

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