In this clip from an interview we did, Sam makes a really important point that is often forgotten, which is about how the popular LLM chatbots and legal AI tools actually work today.

I, as we discuss it, right, where we're talking about really this conversation is about, uh, LLM-based solutions.

Those are basically predicting what's the most likely response or what's the most likely answer based on this, uh, information.

So that is not really a judgment thing.

That's really just collating data and presenting.

Here's Samson Ensor, a partner at Cahill Gordon & Reindel, again, who I'm so grateful to have as a sponsor of Law of Code, with more on how the internet changed law and why we don't necessarily know what AI will do.

Many people are concerned, oh my, you know, jobs are gonna go away because of AI.

But, you know, the computer did not lead to less jobs.

I spoke about this with Sam Enzer, a litigation partner at the law firm Cahill, Gordon and Rindell, which I'm so grateful to have as a sponsor of this episode and co-chair of Cahill Next, Cahill's digital assets focused practice group, who explains more on that situation now.

To take a step back, I think.

you have to look at what was it that commerce did.

So we now know, we did not know on that Friday evening, but more has surfaced through public reporting.

And according to the public reports, the facts of what happened are the commerce department or the government, the Trump administration, received reports of concerns from Amazon, an investor in Anthropic.

And the concern that they raised was that Fable 5, Mythos 5, had a so-called jailbreak that enabled users to effectively turn these powerful models into tools that could be used to commit hacks, exploits, to breach cybersecurity for a variety of different platforms.

This raised national security concerns, and thus the government should intervene, which the government did.

That's

Thank you, Sam, for that point.

Allegations by the U.S. Attorney's Office for the Southern District of New York, which is the premier federal prosecutor's office in the United States.

It's the Navy SEALs of the Justice Department.

And I'm proud to say I used to be a federal prosecutor there.

Anyway, they have alleged... that Spagnuolo, who was a Google employee, that he had access to inside information, confidential data on what the top five search results would be for the year of 2025.

And there were markets on PolyMarket, the prediction market, where you could bet on, you know, is Jimmy Kimmel going to be one of the top five? Is the Pope going to be one of the top five Google results? And so he allegedly placed trades with access to that information, benefiting from that inside information, and was able to profit to the tune of over a million dollars based on the trade, according to the charging document filed by the Southern District.

last week and so they've charged him with colloquially we call it insider trading but the the formal charges are commodities fraud misappropriating business information and using it to place a trade in the commodities markets wire fraud and a money laundering charge uh for taking steps to conceal the proceeds of the alleged insider trading

Now, here's Sam Enzer of Cahill and Cahill Next, again, to preview some of the big questions here, starting with the insider

How are you taking this whole thing apart? What do you think here?

Uh, sure.

Great question, Austin and Austin, uh, Rom and Chris, thanks for having me on.

So this is an interesting...

W- we're in an administration that has been, in many ways, a huge friend to the digital asset sector and to the AI industry.

Looking-- And the president has made clear he wants to remove red tape and make America the, the capital for crypto, for AI, for tech in the world, um, and, and to create the kind of regulatory environment that will attract entrepreneurs to build here and disseminate their products, right? And we are in-- For AI, we're in a race against China i- in many respects, uh, and in, in the blockchain industry, um, there are many projects that integrate AI with crypto, integrate AI with, um, with DeFi, and i- i-- re- regardless, have some of the, the basic tech infrastructure that w- could be regulated by export controls.

So how do I take it? On the one hand, I think because this administration has been so friendly to, uh, the tech industry, um, and you, you have the statement from David Sacks about why, you, you can imagine that, you know, just taking a step back here, we know that Mythos was extreme- is extremely powerful and was in many ways marketed as something so, you know, too hot to touch, right? So dangerous.

I guess I would ask you, if you were advising the US policymakers thinking about this right now of how to balance these concerns, like, and I'm gonna put you in the awful spot of thinking about having to make this decision yourself, how would you be approaching this right now as the US government?

How are you taking this whole thing apart? What do you think here?

Uh, sure.

Great question, Austin and Austin, uh, Rom and Chris, thanks for having me on.

So this is an interesting...

W- we're in an administration that has been, in many ways, a huge friend to the digital asset sector and to the AI industry.

Looking-- And the president has made clear he wants to remove red tape and make America the, the capital for crypto, for AI, for tech in the world, um, and, and to create the kind of regulatory environment that will attract entrepreneurs to build here and disseminate their products, right? And we are in...

For AI, we're in a race against China i- in many respects.

I guess I would ask you, if you were advising the US policymakers thinking about this right now of how to balance these concerns, like, and I'm gonna put you in the awful spot of thinking about having to make this decision yourself, how would you be approaching this right now as the US government?

How are you taking this whole thing apart? What do you think

here? Sure.

Great question, Austin.

And Austin, Ram and Chris, thanks for having me on.

So this is an interesting, we're in an administration that has been in many ways a huge friend to the digital assets sector and to the AI industry.

Looking, and the president has made clear he wants to remove red tape and make America the capital for crypto, for AI, for tech in the world.

and to create the kind of regulatory environment that will attract entrepreneurs to build here and disseminate their products, right? And we are in, for AI, we're in a race against China in many respects.

If you were advising the U.S. policymakers thinking about this right now of how to balance these concerns, and I'm going to put you in the awful spot of thinking about having to make this decision yourself, how would you be approaching this right now as the U.S. government?

A jury will ultimately have to decide that, I would imagine.

Right.

Um, but you know, taking the allegations as we have them, one possibility is, let's say hypothetically that Santos knew he was not going to attend, said he was going to attend, uh, placed the bet that he wouldn't, and then disclosed that he wasn't gonna make it.

That fact pattern is what is known sometimes as scalping or a pump and dumpUm, when I was at SDNY, I prosecuted John McAfee, the McAfee antivirus creator, uh, for a similar type of fraud.

He, he had a, um, he had two things.

He had a Twitter feed where he would...

It was called Coin of the Day.

Can you, um, Sam, give us a sense of the size of, of, of these markets? Like, what's really at stake, and, and sort of level set where things stand?

Yeah.

And the, there was a disclosure that they filed, an SEC filing.

W- the SEC filing was ma- was made in June, but it revealed that prior to June, in May, a sale had taken place.

And so there, there is a dispute right now with, you know, big money at stake on whether or not, who is correct.

For purposes of this trade, is, is the controlling date the date of the trade, the date of the sale of the Bitcoin, or is it when it was made public through the SEC file?

Right.

Part of understanding the, a level playing field.

The second thing is, um, why am I placing this bet? Am I placing this bet because I believe I have better information or better judgment? Is this for fun? What am I, what am I, I doing here? If this is a serious, uh, bet, then I need to, to understand whether I really have some kind of asymmetric advantage that is legal.

A jury will ultimately have to decide that, I would imagine.

Right.

Um, but, you know, taking the allegations as we have them, one possibility is, let's say hypothetically, that Santos knew he was not going to attend, said he was going to attend, uh, placed the bet that he wouldn't, and then disclosed that he wasn't gonna make it.

That fact pattern is what is known sometimes as scalping or a pump and dumpUm, when I was at SDNY, I prosecuted John McAfee, the McAfee antivirus creator, uh, for a similar type of fraud.

He, he had a, um, he had two things.

He had a Twitter feed where he would...

It was called Coin of the Day.

Can you, um, Sam, give us a sense of the size of, of, of these markets? Like, what's really at stake, and, and sort of level set where things stand?