SPEAKERS Eric Ahern; Juliette Draper; Meg O’Neill
[Eric Ahern] 00:08
You’re listening to the Berkeley Technology Law Journal Podcast. I’m Eric Ahern.
[Juliette Draper] 00:13
I’m Juliette Draper.
[Meg O’Neill] 00:14
And I’m Meg O’Neill.
[Juliette Draper] 00:16
Today, we will be covering the verdict announced in the trial of FTX founder Sam Bankman-Fried, the recent bankruptcy of WeWork, and global responses to Biden’s Executive Order targeting AI.
[Meg O’Neill] 00:31
Here are some of the headlines from this week in tech law.
[Eric Ahern] 00:37
First off, we’re bringing into focus a significant event in the financial technology sector. The conviction of former FTX executive, Sam Bankman-Fried, on all charges of fraud and conspiracy. This verdict was rendered against Bankman-Fried, also known as “SBF,” by a New York jury on Thursday, November 2, marking a decisive moment in one of the most high profile financial trials of recent times.1The jury found SBF guilty on two counts of wire fraud, two counts of wire fraud conspiracy, and three other conspiracy charges which carry potential penalties, adding up to 110 years in prison. SBF’s sentencing hearing has been set for March 28, 2024.2
The allegations against SPF centered on the systematic misappropriation of $10 billion from customer accounts at FTX, channeled into SBF’s own trading firm, Alameda Research.3
The trial, held in Manhattan federal court, laid bare a series of grave missteps. Rather than isolated incidents, the jury heard of a sustained and deliberate effort that ultimately led to the implosion of a once-trusted cryptocurrency exchange. Despite the intertwining of FTX’s and Alameda’s finances, the trial revealed the SPF did not implement the necessary safeguards. This action contributed to an astounding $8 billion debt burden, a fact that the defense could not reconcile with the fiduciary responsibilities SBF owed to customers and investors.
The testimony of Caroline Ellison, the former CEO of Alameda Research and SBF’s on-again, off-again girlfriend, was particularly illuminating. Providing an inside account, Ellison detailed the intricate financial schemes and questionable practices that became commonplace under SBF’s direction.4 The jury’s prompt and unanimous verdict, delivered after a month-long trial, underscores the robust nature of the prosecution’s case. Despite his defense team’s portrayal of SBF as a visionary who never intended to defraud, the prosecution’s case and jury’s decision on Thursday reflects a different narrative.5
[Meg O’Neill] 02:35
Hi, listeners, this is Meg. I’m going to be talking about Biden’s recent executive order on AI and some of what has happened around and in response to it.
A large part of the order is geared towards establishing standards for security, privacy, and safety testing of AI tech. But it also funds new forms of AI and asks immigration officials to lessen visa requirements as a way of encouraging overseas talent to come work at American AI companies. On the same day the executive order was signed, the G7 announced its own non-binding code aimed at regulating generative AI tools like ChatGPT and Bard.6 Then on November 1 and 2, the UK held an AI safety summit which brought together international governments leading AI companies, civil society groups, and AI research experts to consider the risks at the cutting edge of AI development, and to discuss ways to use internationally coordinated action to mitigate those risks.7
Also, the EU has been working on its AI Act since 2021, and recently has been struggling to finalize those rules.8 9 Spain currently holds the EU presidency through the end of this year and has been pushing to speed up the deal.10 11 The EU was unable to come to an agreement during their October meeting, but many participants have said that they are hopeful a compromise will be reached by December.12 Otherwise, those talks could be derailed by the European Parliament elections in June. 13 One article by Politico suggested that this all is a race between world leaders vying to be seen as global trendsetters.14 It said that while the executive order is a clear example of Joe Biden’s administration speaking to a predominantly domestic audience, the order also portrays the Biden administration as a world leader in the AI space.15
[Juliette Draper] 04:37
Hey guys, this is Juliette. Today I will be talking about how WeWork recently filed for bankruptcy and providing a little contextualization on how WeWork, unfortunately, got to where they are today. On November 6, former tech startup and flexible office space firm WeWork filed for bankruptcy for its locations in the U.S. and Canada.16 Valued at $47 billion at its peak in 2019, the New York based firm hit substantial challenges after the COVID-19 pandemic shuttered office spaces, shifting many companies to work remotely. 17 This change led to many businesses ending their leases with WeWork amidst, overall, one of the worst crunches in commercial real estate in years. Founded in 2010, by Adam Newman, and Miguel McKelvey, WeWork focused on leasing office spaces for freelancers, small businesses, and larger corporations.18 After rapidly expanding throughout the west coast and abroad, in 2019, WeWork sought to go public. However, after hitting substantial challenges from investors doubting WeWork’s financial strength, Adam Neumann stepped down as CEO.19 Long term investor and Japanese based technology conglomerate Softbank, bailed WeWork out as it teetered on the brink of collapse.20 Then, in October 2021, WeWork went public through a merger via a special purpose acquisition company BowX acquisition.21 WeWork also restructured its balance sheet to reduce debt by closing locations and renegotiating leases with landlords. Today’s news poses an enormous blow to landlords, who in recent years have accepted lower rents from WeWork.22 According to its security filings from as recent as September of 2023, WeWork had close to $16 billion in long term lease obligations.23 And in New York City, owners of old buildings in midtown and downtown Manhattan have leased out entire floors to WeWork. As of March 2023, WeWork leased 6.9 million squares of office space in the city.24 In the coming months, it will be troubling to see how the bankruptcy proceedings impact landlords already struggling to make payments on debts tied to spaces leased to WeWork. WeWork’s bankruptcy also echoes an ominous warning for tech startups hoping to reshape the entrepreneurial workspace landscape. WeWork at its heights sought to disrupt and transform the real estate market while providing like-minded start-ups working spaces to pursue their goals.
[Eric Ahern] 07:16
Thank you for listening. The BTLJ podcast is brought to you by podcast editors Eric Ahern, Juliette Draper, and Meg O’Neill. Our executive producer is BTLJ Senior Online Content Editor Linda Chang, BTLJ’s Editors in Chief are Will Kasper and Yuhan Wu. If you enjoyed our podcast, please support us by subscribing and rating us on Apple Podcasts, Spotify, or wherever you listen to your podcasts. If you have any questions, comments or suggestions, write us at BTLJpodcast@gmail.com. This episode was recorded on November 6, 2023. The information presented does not constitute legal advice. It is intended for academic and entertainment purposes only.