Weaponization Fund Challenge & SBF's Appeal Fails

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1:09The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A. Member FDIC. Copyright 2026. JPMorgan Chase and Company. This is Bloomberg Law with June Grosso from Bloomberg Radio. President Trump's$1.8 billion fund for alleged victims of political weaponization faced rare pushback 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 Blanche testified on Capitol Hill two weeks ago that the fund would not go forward, while at the same time describing its importance.

1:56The reasons for the fund is something that President Trump talked about for a long time, which is the fact that there were a lot of people in this country who had their government weaponized against them. The reasons for the fund, I think, remain as important as they were before, but 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 I'd have to ask the lawyers. I don't know. I know one thing. The weaponization.

2:32Are you talking about the weaponization? Yeah, what's your decision? The weaponization fund, 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 Leonie Brinkema rejected the government's arguments that Blanche'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 Blanche and Treasury Secretary Scott Besant 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 counsel at the Justice Department.

3:19Amy, explain why Judge Brinkema 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 moot 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.

4:00Some 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 it 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.

4:43I 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. She decided to turn first to this question of mootness. 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 missed. Candidly, I think that is a bit of a stretch, even if the government does produce the 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.

5:26The reason for that is that if these plaintiffs have standing, which she seemed to assume in her order, proving mootness is an uphill battle for the government. They have to do more than just change their conduct. It's a settled matter of law, 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.

6:07Well, 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 U.S. government for alleged misconduct related to the classified documents case and related to the Russia investigation.

6:44Now, 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 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, Blanche 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.

7:34He did say that, and I find that particular document to be a puzzle, if not shocking. First, as an initial 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.

8:15It was published as a separate document a day later, signed by someone else, not signed by the Treasury Department. It was wildly inconsistent with certainly normal DOJ policy or practice in this area. And is that waiver before Judge Brinkema in this case? I don't think it does, because it is 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 egregiously overbroad, right? It's not just tax audit. It says any matter currently pending or that could be brought by any federal agency.

9:01Like, 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 D.C. 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.

9:44I 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 judges 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.

10:22The Trumps dismissed it with prejudice upon reaching a settlement agreement with the federal government. The court dismissed it. well, the court, I don't even know that she had an option at that point, but assumed that 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.

11:01But I think what the court has done in reopening the case and asking for briefing is indicative, but 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.

11:42That 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 Claims 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 Tort Claims Act received enormous payouts. And I assume they're imagining they can do something based on individualized administrative claims by others as well.

12:17It'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 it is possible it will be a viable avenue for them for other claims as well. So you mentioned Michael Flynn and Carter Page. The Justice Department made separate$1.25 million settlements in two lawsuits they filed. Other agreements included$4 million to FBI employees who claimed 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.

13:16And Amy, the Justice Department decides itself whether to pay these off. There's no second opinion. There's no approval from a judge. That's correct. That's how they work. And the Justice Department has had in the past a pretty robust process for evaluating those. The agency looks at them, the Department of Justice looks at them as all enshrined in regulation. If anything, they historically have been very protective of the taxpayer risk. So even when somebody has a valid claim, frequently the Justice Department will push back against overpayments and evaluate the litigation risk. It's a pretty serious process or has been historically.

13:57I don't know whether it's being bypassed or ignored or it's just controlled by political officials at this point. 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. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions.

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17:06President 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.

17:57Joining me is Bloomberg Law reporter Ben Penn. Ben, start by telling us about this smuggling case. Sure, there were two businessmen. One is a Canadian citizen and 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 U.S. technological innovation from foreign adversaries.

18:42And then within a few hours after that case was first announced on December 8th, Trump took to Truth Social and announced that he had reached a deal with China to permit the distribution of some of those same advanced chips, the H200 processors, into China. So that caused some instant problems for the case, and then more recent developments have further complications. 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 is trying to point out in arguing that the president's policy pronouncements don't have bearing on the evidence that they have assembled.

19:29And the issue there, according to the defense lawyers, is that there's basically been an ongoing dialogue between the U.S., NVIDIA, China, other various cabinet officials, departments involved, including the Congress Department. And a lot of this has all been behind closed doors. These conversations began throughout 2025 and overlapping with the 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 prosecutors' discovery obligations, they need disclosure of these internal deliberations that took place inside the White House, China, and Chinese officials, NVIDIA, in order to learn whether it's possible that the businessmen, the defendants, were not in fact flouting export control laws and were actually in compliance with what the president was contemplating.

20:32We'll see. I've talked to lawyers who say that they think this argument is a stretch, but it's pretty fascinating that in this case we have a judge who has agreed and ordered the government to produce discovery on these unpublished White House communications, which is really rare. The government is 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 White House deliberations is upheld, then the Justice Department may have to make a decision of do we dismiss this case rather than produce what they would argue are privileged communications.

21:20How 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 been open. and his administration has been open about their view of the White House controlling the ins and outs of Justice Department charging decisions, therefore making the White House communication subject to discovery. This is an argument that would not surprise me if more defense lawyers tried to bring that argument as we continue to see the Justice Department moving at the direction of the president in some of their investigations of the president's perceived enemies.

22:17But 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 in any justice department, which he said, irrespective of the relationship between President Trump and DOJ, that the president in any administration is effectively an extension of the prosecution team. And that's something that is certainly going to be a challenge 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 if this is the type of argument that the defense lawyers have success in here, even though the judge wasn't quite agreeing to their reasoning.

23:05We'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 court in the judges' chambers told me that there would be a motion that will be filed, maybe by the end of today, that will reschedule the trial. The government had asked for a continuance, and it's been granted. Would this have been known if Trump hadn't sent out that Truth Social post?

23:45Yeah, that's a good question. I think, I'm not a tech reporter, but I do believe that there had been public reporting about various Trump, NVIDIA, China talks throughout the past year. There have been public disclosures and various forms of this policy change, but 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.

24:32because 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 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.

25:12Thanks so much, Ben. That's Bloomberg Law Reporter Ben Penn. What if you could have more wins, more support, more sound effects? At LPL Financial, we like the sound of that because LPL offers more. Advisors, what if you could have more ways to help your clients? Ready to invest? What if you could find an advisor that really understands you? When it comes to your finances, your business, your future, at LPL, we ask, what if you could? Paid advertisement. Investing involves risk, including potential loss of principal. LPL Financial LLC. Member FINRA SIPC. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms.

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26:27That's public.com slash market. Add paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC Registered Advisor. Crypto services by ZeroHash. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. When you own your own business, you own every decision. Now own the card that rewards you for it. The Chase Sapphire Reserve for Business card brings the best Sapphire Reserve benefits to business owners who expect hardworking rewards. Designed to meet the needs of business owners at scale, this pay-in-full card elevates your travel experience and offers premium benefits and value toward business services that will take your business to the next level.

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27:44Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank N.A., member FDIC. Turning now to other legal news and a case we haven't heard about for quite some time. FTX co-founder Sam Bankman-Fried 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.