What a Government Shutdown Would Mean for Sam Bankman-Fried’s Day in Court
The United States v. Samuel Bankman-Fried is scheduled to kick off in the U.S. District Court for the Southern District of New York next week, with jury selection beginning Tuesday. Throughout October and early November, if all goes to plan, former crypto king Sam Bankman-Fried will be tried in Manhattan on two counts of wire fraud and five conspiracy counts related to securities fraud, commodities fraud, and money laundering. Next week, however, could also usher in the start of a federal shutdown should a group of far-right House Republicans holding out against a short-term government funding bill continue their obstruction through the weekend. If the majority-Republican House of Representatives cannot reach a spending deal by Sunday at 12:01 a.m., a significant portion of government activity will either slow down or stop functioning altogether—an outcome that appears increasingly likely, as federal agencies warn their staffers of the furloughs that will result.
Recent history indicates that the judiciary won’t avoid these effects. The most recent shutdown of this kind, which occurred in late 2018 through early 2019 and stretched over a record 34 days, nearly sent federal courts into a fiscal and operational crisis as congressional Republicans closed the spigot. The courts’ funding reserves subsequently dwindled, messing up case schedules and nontrial courthouse events, as well as compensation for lawyers, administration employees, and jurors.
Suffice it to say that’s not an ideal situation for the Department of Justice, which is currently pursuing high-profile cases against SBF, other cryptocurrency bros, Google, and Donald Trump, among others. With the highly anticipated, long-planned SBF trial starting just two days after Congress’ legislative deadline, it’s worth asking how a probable shutdown will affect one of the judiciary’s most important cases of the year—one with broader implications for the financial sector, for the government’s regulatory muscle, for crypto criminals everywhere, and for the millions of people screwed over by the collapse of SBF’s firms (the crypto exchange FTX and the crypto hedge fund Alameda Research).
It turns out that the impact of a shutdown wouldn’t be apparent at first, although it could escalate over time should this governmental crisis meet or surpass the 2018–19 record. We don’t have much indication on how long an October shutdown would drag on, although a Goldman Sachs economist is predicting three weeks max. That length of time might not be too nettlesome for the SBF case or even for SDNY as a whole; earlier this month, the Administrative Office of the U.S. Courts stated to Reuters that federal courts have enough money to conduct business as usual for two weeks at minimum, with pay for judges and staffers intact, and no interruptions to new or ongoing litigation.
What if the shutdown does pass the two-week threshold, as the Goldman economist is projecting? Even just a couple of days over that deadline could cause massive problems, as demonstrated in October 2013, when a 17-day shutdown forced the Southern District of New York Bankruptcy Court to postpone several cases by a month, focusing on the highest-priority suits and building up a nigh-“unmanageable” backlog near the end of the calendar year. This time, SDNY district executive Edward Friedland told me in a phone conversation, the court would reassess its funding reserves at the end of the two-week period and act from there. If the district turns out to have extra cash on hand or is able to collect a substantive amount of court fees over those weeks, then cases would proceed as normal into the next week at least, with the court keeping an eye on its remaining budget throughout. “During the last shutdown, we operated for four weeks without any issues,” said Friedland.
Even if the money isn’t there after two weeks, SDNY could figure out ways to mitigate the fallout in one of the most important federal courts in the nation. Because of the district’s importance, it’s likely that any temporary budget setbacks or employee furloughs would hit other parts of the DOJ before hurting the Southern District of New York. Yet if the cash crunch at the department and at SDNY is substantial, the court might decide that, after “exhausting all funding,” it would start to cut back by delaying payments to jurors, Friedland informed me. It’s not that the case would halt, or that jurors would stop hearing arguments; rather, they’d get their public service checks a little later than usual. If the shutdown actually breaks the 2019 record, SDNY would only then have to figure out what to do in such an unprecedented circumstance—as in, whether it could take on cutbacks that may hit other courts first, whether those include court and lawyer furloughs and other postponed payments.
For the most part, however, Friedland expects that SBF’s October trial will go on as planned and on schedule; considering how important a case it is for SDNY, the government will want to marshal its resources in this corner however possible. “On the outside, people shouldn’t expect to see any changes in how we litigate this case in particular,” said Friedland.
