“Elon Musk Opposes Law Firm’s Hiring of SEC’s Former Crypto Enforcement Unit Head” —

• “…Elon Musk is opposing a move by plaintiff-side firm Bernstein Litowitz Berger & Grossmann LLP to hire Jorge Tenreiro, the former chief litigation counsel of the U.S. Securities and Exchange Commission.”
• “In a court filing, Musk argued that Tenreiro had a significant role in an SEC enforcement action against him related to the same issues as a securities fraud lawsuit filed by Bernstein Litowitz concerning Musk’s acquisition of Twitter, now called X.”
• “The law firm announced last month its intention to hire Tenreiro and sought approval from the judge overseeing the shareholder lawsuit for its proposed conflict screening measures to ensure Tenreiro would not work on the case. However, Musk contended in his filing that Tenreiro’s involvement in the SEC’s investigation into him was substantial, including recommending and advancing the enforcement action based on the same conduct alleged in the private litigation.”
• “In 2022, former Twitter shareholders filed a lawsuit against Musk, alleging he delayed disclosing his accumulation of a significant stake in the company to keep stock prices low, saving him approximately $143 million. Musk later acquired Twitter and privatized it, renaming the platform X. During the same period, the SEC, under the Biden administration, also initiated legal action against Musk, claiming he failed to file a timely beneficial ownership report after acquiring more than a 5% stake in Twitter in 2022.”
• “At the time of the SEC’s lawsuit against Musk, Tenreiro served as the agency’s chief litigation counsel, having previously led its cryptocurrency and cyber unit. Musk’s filing stated that Tenreiro participated in discussions about the investigation and reviewed a memorandum recommending that the SEC pursue enforcement action.”
• “Bernstein Litowitz has maintained that Tenreiro’s role in the SEC’s investigation was minimal and emphasized that he would not participate in their lawsuit against Musk. The firm argued that its conflict screening procedures would prevent any issues, noting that defendants in other cases involving Tenreiro’s prior SEC work had approved similar measures.”
• “Musk, however, expressed concerns about the feasibility of effective screening, citing the close-knit nature of Bernstein Litowitz’s securities fraud practice and its relatively small New York office. He also pointed to Tenreiro’s social media activity, noting that the former SEC official had ‘liked’ posts critical of Musk, suggesting bias.”
• “In a court declaration last month, Tenreiro disclosed that he contacted Bernstein Litowitz about employment opportunities after being reassigned to the SEC’s information technology department in February. He accepted a buyout offer and left the agency on April 4. Bernstein Litowitz stated in April that Tenreiro has no memory of confidential government information related to the SEC’s case and does not possess nonpublic information that could disadvantage any defendant in the litigation.”
• “The law firm has requested that the judge approve its conflict screening procedures to proceed with hiring Tenreiro.”

“The hidden reason law firms that cut deals with Trump may regret it” —

• “It is shameful and alarming that nine leading Big Law firms caved when President Trump threatened their financial bottom lines. But putting aside potential criminal exposure — both a perpetrator and a target may be guilty of bribery, for example — these timorous law firms may soon face practical problems that, ironically, affect their financial well-being.”
• “The firms have a serious conflict-of-interest problem that has been hiding in plain sight.”
• “A core element of the ethical rules that bind all lawyers in the U.S. is the understanding that a lawyer may not represent a client if that representation conflicts with the interests of other clients the lawyer represents, or other commitments made by the lawyer. Professional ethics requires that law firms must avoid such conflicts.”
• “Having reached agreements with Trump, these law firms have now expressly aligned themselves with the interests of the federal government. The professional rules against serving two or more masters therefore should disqualify these firms from doing any work against the federal government.”
• “The firms siding with the administration also represent important clients, many with claims against federal agencies. In such cases, if the government seeks to disqualify a law firm because of this obvious conflict, it ought to win.”
• “If these law firms agreed to represent the federal government directly, as Trump announced, this would create an unmistakable conflict. Each American law firm is treated as a single entity, so each lawyer’s client is thus also the firm’s client. And there are few if any large law firms that don’t have cases against the federal government and therefore may not represent the government — even in unrelated matters. If Trump insists on direct representation, as he has touted, any law firm would have to drop all its other clients who oppose the government.”
• “The rules forbidding professional conflicts may sometimes be waived, but any such waiver must come from both parties. Even if a firm’s clients were willing to agree to conflicted representation, why would the government ever waive a conflict in a vigorously disputed matter?”
• “The firms that agreed to Trump’s deal are now in a very precarious position. Engaging in a conflict of interest without a proper waiver violates professional ethical rules in every state, and a firm’s lawyers thereby would risk serious professional sanctions.”
• “It should therefore be extremely difficult for these firms to continue their work when the federal government is an adverse party. Paradoxically, such a major financial hit is far more likely than any possible criminal law exposure resulting from the deals. Trump and his minions need not fear any prosecution by the current Department of Justice.”
• “Nonetheless, the firms that publicly aligned their interests with the federal government have demonstrated that they will compromise to please the president. This is shaky ground. The lingering threat of soft sanctions inevitably infuses the firm’s representation. If the agreement influences the judgment of any lawyer in the firm, this is a conflict situation.”
• “In addition, those law firms that reached an agreement with Trump must worry about possible malpractice claims should any cases against the government go wrong. If there is the slightest evidence that the law firm walked on eggshells in their representation of any private client, the stench of unethical conflicts of interest might follow. Even ignoring the moral and reputational dimensions of these firms’ agreements, their bottom lines may suffer as well.”