This is Bloomberg Law with June Grao

from Bloomberg Radio.

>> President Trump's $ 1.8 billion fund for

alleged victims of political

weaponization faced rare push back from

Republicans as well as from Democrats

who slammed the proposal as a slush fund

for the president's allies and

supporters. Acting Attorney General Todd

Blanch testified on Capitol Hill two

weeks ago that the fund would not go

forward while at the same time

describing its importance.

>> The reasons for the fund is something

that President Trump talked about for a

long time um which is the the fact that

there were a lot of people in this

country who had their government

weaponized against them. Um the reasons

for the fund I think were were were it

remain as important as they were before

but um we are not moving forward with

the fund

>> and President Trump has continued to

express support for the fund.

>> Excuse me, Mr. President. Just to

clarify on what you were asked earlier,

is the $ 1.8 billion DOJ fund dead or is

it on hold?

>> It's uh I'd have to ask the lawyers. I

don't know. I know one thing, the

weaponization. Are you talking about the

weaponization?

>> Yeah. What's your decision? the

weaponization fund uh as far as I'm

concerned was a beautiful thing.

>> Well, a federal judge in Virginia used

Trump's own words against the government

in ruling that a lawsuit challenging the

fund can go forward. Judge Leone Brinkma

rejected the government's arguments that

Blanch's public statements that the plan

was dropped were enough confirmation.

She gave the government one week to

submit a written sworn statement signed

by Blanch and Treasury Secretary Scott

Bessant declaring that the fund will not

be pursued. My guest is Amy Powell,

litigation director at Lawyers for Good

Government and a former senior trial

council at the Justice Department. Amy,

explain why Judge Brinkma issued a

preliminary injunction and didn't accept

the government's arguments that the case

was moot. Now,

>> she needed evidence. She needed the

government to develop a record as to the

fact the fund isn't going forward if

it's really not going forward in any

way, shape, or form. It's frankly

bizarre that the government filed

insisting that the case was moved based

on the acting attorney general's unsworn

and equivocal statements on the subject.

>> There are five lawsuits challenging the

fund, I believe. Who's bringing this

particular lawsuit? One of them is a

former federal prosecutor. Some are

nonprofits who feel like they might be

targeted as a result of the operation of

the weaponization fund if it were likely

to go forward. And they're represented,

I believe, by Democracy Forward in that

case. They are people who feel like they

would be harmed by the operation of the

fund. Now, it's going to be an uphill

battle for any of these plaintiffs to

prove that they individually would be

injured by the operation of the fund if

it went forward. But they made as

compelling a case as possible when the

government came in and insisted it's all

moot that the weaponization fund isn't

going forward despite the existence of

an unrescended apparently attorney

general order creating the fund and a

settlement agreement that as far as I

know the government still insists is

valid.

>> I mean the standards for getting a

preliminary injunction are pretty high.

Did the judge find that the plaintiffs

or some of the plaintiffs had standing?

>> No. As far as I know, the court has not

ruled on that. Decided to turn first to

this question of mooteness. She hasn't

ruled on the merits of the underlying

claim, but she has strongly suggested

that if the government could produce

this declaration that says more or less

what she suggested it needs to say, that

the case would be new. Candidly, I think

that is a bit of a stretch. If the

government does produce a declaration

that says the weaponization fund is not

going forward in any way, shape or form,

unless the government gives a reason as

to why, the reason for that is that if

these plaintiffs have standing, which

she seemed to assume in her order,

proving mootess is an uphill battle for

the government. They have to do more

than just change their conduct. It's a

settled matter of law. It's what we call

the voluntary cessation doctrine that

when one party voluntarily changes its

conduct, that's not enough to get rid of

a lawsuit as moot because they could

simply change their conduct back. So a

declaration that says we changed our

conduct might not be good enough unless

it explains why and offers some sort of

commitment.

>> And just explain why this weaponization

fund is considered illegal by most

experts.

>> Well, there's a lot going on in the

weaponization fund, right? So the

lawsuit that it purported to settle was

a lawsuit brought by Donald Trump, some

of his family members and associates

against the IRS for leaking his tax

returns. And it also purported to settle

two other matters which were pending as

administrative claims. So someone had

gone to the agency and said, "You

wronged me." Those claims were brought

by Donald Trump personally, I think

against the Justice Department, but

against the US government for alleged

misconduct related to the classified

documents case and related to the Russia

investigation. Now, those underlying

administrative claims, first of all, are

plainly meritless, near frivolous. I

know less about the leak of the tax

returns. It's possible there is some

something there. But what you don't do

is settle a case, even if it were of

some marginal validity. You don't settle

it by signing over that huge amount of

money to third parties. The

weaponization fund seems like a fairly

transparent attempt to reward the

president's supporters even if in fact

because of their engagement in

misconduct and illegal activity. And

when he testified to Congress, Blanch

said that the part of the agreement

banning the government from ever

prosecuting any IRS claims against

Trump, his family or his businesses.

That part is still in place.

>> He did say that and I find that

particular document to be a puzzle if

not shocking. First, as an additional

matter, it's not entirely clear to me

that it is part of the settlement

agreement. When DOJ announced the

settlement agreement, included the

agreement itself and the attorney

general order that creates the

weaponization fund, nothing in the

agreement itself mentions a waiver for

Trump and his family of tax returns or

anything else. In fact, it only purports

to resolve the pending Trump lawsuits.

But don't actually think that waiver

document is legitimately considered part

of the settlement because it's not

actually mentioned in the settlement

itself. was published as a separate

document a day later, signed by someone

else, not signed by the Treasury

Department, is wildly inconsistent with

certainly normal DOJ policy or practice

in this area.

>> And is that waiver before Judge Brinkma

in this case?

>> I don't think it does because it was

focused on the weaponization fund and

the creation of that fund, how it harms

this particular group of plaintiffs. I

don't think they asserted any claims

related to the waiver language itself.

>> Yeah, it just seems like that's being

ignored

>> and it's it's egregiously over broad,

right? It's not just tax audit. It says

any matter currently pending or that

could be brought by any federal agency.

Like if some Trump grandchild has a

pending parking ticket from a national

park ranger, like that is wiped out by

this. I cannot imagine that they

followed any proper procedures or got

consent from the relevant agencies or

that such a settlement could ever be

justified.

>> So now another judge, a DC federal

judge, Richard Leon, last week denied a

request for an order blocking the fund,

saying he wasn't persuaded that there

was a live controversy based on the

government's representations. But he

also issued a warning to the Justice

Department during the proceedings.

Quote, "Don't play possum with this

court."

>> I don't necessarily agree with Judge

Leon's decision, but I imagine the

skepticism you just quoted, you know,

based on experience with the federal

government recently in court cases and

also just based on the somewhat bizarre

posture here where the government is

insisting it's moot but has refused to

put in any competent evidence to show

it. And also Miami judge is responding

to I don't know whether it was a letter

or what from a group of federal judges

saying that this was a fraud on the

court.

>> Yes. That's fascinating. That is the

original case right that was brought by

the Trumps against the government. The

Trumps dismissed it with prejudice upon

reaching a settlement agreement with the

federal government. The court dismissed

it. Well, the the court I don't even

know that she had an option at that

point, but assumed the dismissal was

valid. She was not asked to evaluate any

settlement, but a group of federal

judges filed, I think they filed it as

an amicus motion to reopen the case

because the dismissal was part of a

fraud and that the court was being used

in perpetrating a fraud, which we're in

uncharted territory here. I'm reluctant

to opine on the merits of the motion or

what the court should do in the

situation, but I think what the court

has done in reopening the case and

asking for briefing is indicative that

she's very troubled.

>> There are indications that people in the

Trump administration are looking for

other ways to compensate these people

they claim were victimized. These people

they claim were victimized by the Biden

administration.

Lindsey Graham, Republican Senator

Lindsey Graham in a social media post

backed the idea of pursuing payouts

through the federal tort claims act. And

then Stanley Woodward, the third top

official at the Justice Department,

responded with quote, "We're working on

it." That post was deleted. But that's

another way for them to compensate these

people, right?

>> Yes. That clearly appears to be their

strategy, and they've done it before,

right? They made giant payouts under

federal tort claim act and similarly

styled cases. Mike Flynn and Carter

Page, I assume there are others as well.

Those were just the headline ones. But

people who clearly weren't entitled to

any payout from the federal government

under the federal claims act received

enormous payouts. And I assume they're

imagining they can do something based on

individualized administrative claims by

others as well. It's possible that the

weaponization fund was an attempt to

bypass the normal Department of Justice

machinery that would have attorneys look

at and opine on such claims. It didn't

stop the payouts to Mike Flynn as far as

I know. So, uh it is possible it will be

a viable avenue for them for other

claimants as well.

>> So, you mentioned Michael Flynn and

Carter Page. The Justice Department made

separate $1.25 $25 million settlements

in two lawsuits they filed. Other

agreements included $4 million to FBI

employees who claim political

retaliation under Biden. The DOJ agreed

to pay half a million dollars to cover

the attorney's fees of individuals who

were part of a litigation accusing the

Biden administration of

unconstitutionally coercing social media

platforms into taking down posts about

the COVID pandemic and the 2020

election. And Amy, the Justice

Department decides itself whether to pay

these off. There's no second opinion.

And there's no approval from a judge.

>> That's correct. That's how they work.

And you know, the Justice Department has

had in the past a pretty robust process

for evaluating those. The agency looks

at them, Department of Justice looks at

them as all enshrined in regulation. Uh

if anything, they historically have been

very protective of the taxpayer fisk. So

even when somebody has a valid claim,

frequently the justice department will

push back against overp payments and

evaluate the litigation risk. It's a

pretty serious process or has been

historically. I don't know whether it's

being bypassed or ignored or it's just

controlled by political officials at

this point. No idea.

>> It certainly seems like from the claims

that have been granted there is a lot of

politics involved in this. Thanks so

much for joining me on the show, Amy.

That's Amy Powell, litigation director

at Lawyers for Good Government.

President Trump's approval for Nvidia to

sell chips to some customers in China

has potentially derailed a major AI

smuggling prosecution nearing trial.

lawyers for one of the two businessmen

indicted for evading export control laws

by transporting $ 160 million. Nvidia's

powerful generative AI accelerating H100

and H200 processors have argued that

further information on Trump's

deliberations with Nvidia and China may

prove their clients innocence. In an

unusual decision, a Houston federal

judge directed federal prosecutors to

provide the defense with non-public

presidential materials reflecting Trump

policies that relaxed restrictions on

Nvidia shipments to China. Joining me is

Bloomberg Law reporter Ben Penn. Ben,

start by telling us about this smuggling

case.

>> Sure. There were two businessmen. uh one

is a Canadian citizen, another a Chinese

citizen. Both operate companies on the

east coast who were indicted last

December for violating export control

and smuggling laws for transporting

about $160 million worth of Nvidia

produced AI chips to China. and a case

that senior officials in the Justice

Department had promoted last December as

a primary example of this

administration's commitment to

protecting US technological innovation

from foreign adversaries. And then

within a few hours after that case was

first announced last on December 8th,

Trump took to social and announced that

uh he had reached a deal with China to

permit the distribution of some of those

same advanced chips, the H200 uh

processors into China. So that caused

some instant problems for the case and

then uh more recent developments have

further complicated

>> Trump's announcement come after the

alleged smuggling. So how is this a

problem for the case?

>> Well, that's the point that the

government has tried to point out in

arguing that the uh president's policy

pronouncements don't have bearing on the

evidence that they have assembled. And

the issue there according to the defense

lawyers is that there's basically been

an ongoing dialogue between the US,

Nvidia, China, other uh various cabinet

officials, departments involved,

including the commerce department and a

lot of this has all been behind closed

doors. These conversations began

throughout 2025

and overlapping with a time period in

which the businessmen are in which their

alleged scheme took place. So it could

be argued and the defense lawyers have

tried to argue that they need more

disclosure as part of the prosecutor's

discovery obligations. They need

disclosure of these internal

deliberations that took place inside the

the White House. China and Chinese uh

officials, Nvidia in order to learn

whether it's possible that the uh

businessmen, the defendants were not in

fact flouting export control laws and

were actually in compliance with what

the president was contemplating. We'll

see.

You know, I've talked to lawyers who say

that they think this argument is a

stretch. But, you know, it's pretty

fascinating that we, in this case, we

have a judge who has agreed and order

the government to produce discovery on

these unpublished White House

communications, which is really rare.

The government is uh not going to easily

hand over that information, and they've

already filed a motion to reconsider.

And if the judge doesn't reverse course,

then we can expect that to be appealed.

But what might come into play here is if

the judge's order for the government to

produce discovery of those uh White

House deliberations is upheld, then the

Justice Department may have to make a

decision of uh do we dismiss this case

rather than produce what they would

argue are privileged communications.

>> How unusual is it for a judge to order,

you know, internal White House

communications to be turned over to a

defense team?

>> Very unusual. And what's interesting

here is that the judge didn't actually

use as his reasoning what the defense

had argued which was that this justice

department is so tightly under the

control of this president, President

Trump, who has, you know, been open, his

administration has been open about their

view of the White House, you know,

controlling the ins and outs of Justice

Department charging decisions, therefore

making the White House communications

subject to discovery. This is an

argument that it would not surprise me

if more defense lawyers try to bring

that argument as we continue to see the

Justice Department moving at the

direction of the president in some of

their, you know, investigations of the

president's perceived enemies. But in

this case, the judge didn't even mention

anything specific to Trump's behavior as

his reasoning for granting the order. He

said that this could apply to any

president and any justice department

which he said irrespective of the

relationship between President Trump and

DOJ that the president is in any

administration is effectively an

extension of the prosecution team and

that's something that is uh certainly

going to be challenged if it's if the

judge doesn't agree to the motion for

reconsideration. We'll see that appeal

to the fifth circuit. I have no doubt.

But what's interesting here to me is

that, you know, this is the type of

argument that the defense lawyers, you

know, have success in here, even though

the judge wasn't quite agreeing to their

reasoning. We'll see defendants in other

cases try to argue that specific

relationship between this DOJ and White

House makes internal White House

communications more subject to

discovery.

>> Is the trial still on at this point?

No, it was supposed to start this

morning in Houston and there hasn't been

a docketed order yet, but the trial

didn't begin today. An employee of the

of the court in the judge's chambers

told me that there would be a motion

that will be filed maybe by the end of

today that we'll reschedule the trial

that the government had asked for a

continuence and uh it's been granted.

>> Would this have been known if Trump

hadn't sent out that truth social post?

>> Yeah, that's a good question. And I

think I'm not a tech reporter, but I I

do believe that there had been public

reporting about uh various Trump,

Nvidia, China talks throughout the past

year. There have been public disclosures

and various forms of this policy change,

but it's it's it's kind of ambiguous as

to exactly how it's being carried out.

when or if the case goes to trial, what

complications could this pose for

prosecutors? If this case ever does go

to trial, the prosecutors are going to

have to contend with the sort of mixed

messaging that Trump's policy change to

permit sales of the Nvidia chips into

China will create for their prosecution

because now they're going to have to,

you know, even if technically the

conduct was illegal at the time it was

committed before Trump had come up with

a new announced a new policy, it's still

the issue of, well, why are we devoting

government resourc resources to conduct

that under current policy appears to be

legal. And that's something that the

prosecutors may take measures to address

and it may be something that skeptical

jurors could be weighing on them as they

are considering whether to agree with

the government's position.

>> So the next thing is we'll see if the

judge grants the motion for

reconsideration or the government likely

appeals to the fifth circuit. Thanks so

much, Ben. That's Bloomberg Law reporter

Ben Penn.

Turning now to other legal news and a

case we haven't heard about for quite

some time. FTX co-founder Sam Bankman

Freed lost his bid to overturn his fraud

conviction and his 25-year prison

sentence. A federal appeals court

rejected his claims of not receiving a

fair trial and declined to throw out the

2023 guilty verdict that the one-time

cryptocurrency mogul argued was tainted

by improper evidentiary rulings and a

biased judge. Joining me is Bloomberg

legal reporter Ava Benny Morrison who

covered the trial. Ava, remind us what

SPF was convicted of. Sam Baitman Freed

was convicted of fraud um and sentenced

to 25 years in prison for lying to

investors, companies, and lenders and

essentially defrauding them out of uh

billions of dollars at his

cryptocurrency

uh company FTX.

>> Let's talk about some of the points on

his appeal. one that the judge prevented

SBF from introducing evidence that FTX

had enough money to cover customer

withdrawals.

>> Yes, that was one of the main points in

San Bank's appeal. Um he wanted to

introduce evidence that FTX was actually

solvent. Uh and it's given the time that

he would have been able to pay back

customers every single dollar. uh he

wanted to talk about um the bankruptcy

process and really zero in on that fact.

He said that the judge wouldn't allow

him and it essentially led to a thumb

being put on the scale and he couldn't

mount a proper defense.

>> And what did the appeals court say to

that?

>> The appeals court threw that out and

said that um you know he had ample

opportunity to talk about some of the

liquidity issues um with FTX and Alama.

I remember during the trial talking to

you about the fact that Judge Kaplan had

Sam Bankman Freed testify outside the

jury's presence before he testified

before the jury, which is really odd.

>> Yeah, that was one of uh the other key

points in Sam's appeal uh that he had to

go through this kind of deposition

outside the presence of the jury but in

front of the prosecution. So he said

that he was essentially previewing his

defense to the other side. He also said

that uh Judge Kaplan wouldn't let him

mount a advice of council defense. He

wanted to talk about how he relied on an

army of of lawyers um and other

professionals before he made decisions

about moving money around and uh loans

to other executives. But the judge ruled

that he couldn't do that. And this was

all part of um why the the trial was

unfair to him.

>> And SPF's lawyers said the judge

continually ridiculed their client and

pressured jurors into a quick verdict on

the first day of deliberations.

>> Yeah. So, this was a little bit of an

unusual point. Uh Sam tried to point to

the fact that the judge offering to

provide pizza and dinner to the jury and

have them stay longer than 9 to5 was all

part of a pressure tactic to get them to

reach a verdict as soon as possible. But

that's not entirely unusual to see um

juries kind of sequestered or stay past

the 5 p.m. 5:00 p.m. deadline to try and

reach a verdict. And how did the

appellet court respond to these other

allegations?

>> They said that um even though he had to

go through this um kind of deposition um

before the jury came in and that there

were these rulings against him and what

he was committed to talk about. Uh the

appeals court found that he was able to

present his version of events to the

jury when he testified regarding his

good faith belief that Alamita's assets

were greater than its liabilities. So

the court found that he was still able

to present that sufficient case.

>> And we haven't talked yet about the

money that he was ordered to pay. Is

that still in place?

>> Yeah, that's right. So he was ordered to

repay 11 billion uh which is an

extraordinary number. and he had argued

in his appeal that you know it meant

that Bankfried's ability to earn a

livelihood ever again was very slim and

argued that it was unconstitutional but

the court found that even if he will

never be able to close the satisfying

the 11 billion dollar judgment it did

not render the forfeite unconstitutional

or grossly disproportionate

>> with the bankruptcy and stuff are the

customers going to be refunded most of

the money.

>> I think the bankruptcy process has been

largely successful um for most of the

FDX customers. Um a lot of them if not

all of them have got uh their money back

uh if not all of their investment then

very close to but the argument that they

make is that they could have held on to

some of these investments and could have

got some of the high returns that we've

seen over the past you know year or so

that the other investors have had um in

the crypto market specifically.

>> The appellet court said the government's

evidence against him was conservatively

stated robust. So remind us about the

main prosecution witnesses against him.

>> The prosecution's case was bolstered by

the testimony from a few key witnesses

including the co-founder of FTX, Gary

Wong, and uh the former CEO of Alam

Research, Caroline Ellison. They were

the star witnesses for the government

and they explained how Sam would move

money around um and how he knew that he

was using customer funds for other

investments and to purchase real estate

and he knew that was wrong and that

evidence really helped convict um Sam in

the end.

>> Have they said what they're going to do?

They could appeal to the full circuit or

they could try a Supreme Court appeal.

>> Exactly. Um he could try a Supreme Court

appeal. We haven't heard yet from his

legal team about what he's going to do

next. Though he has submitted an

application for a pardon. He has been,

you know, mounting a bit of a social

media campaign even though he's in

prison, appealing to President Trump and

appearing on conservative news platforms

trying to really big up his Republican

bonafide. And we reported last week that

he has submitted a formal application to

the Justice Department for a pardon.

It's great to talk to you again, Ava.

Welcome back from maternity leave.

That's Bloomberg legal reporter Ava

Benny Morrison. And that's it for this

edition of the Bloomberg Law Show.

Remember, you can always get the latest

legal news on our Bloomberg Law podcast.

You can find them on Apple Podcast,

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www.bloomberg.com/mpodcast/law.

And remember to tune in to the Bloomberg

Law Show every week night at 1000 p.m.

Wall Street time. I'm June Graasso and

you're listening to Bloomberg.