Sam Bankman-Fried needs tougher bail restrictions, judge says

A federal judge on Thursday ordered lawyers for Sam Bankman-Fried, the disgraced founder of bankrupt cryptocurrency exchange FTX, to create a plan with prosecutors that would ensure Mr. Bankman-Fried does not delete text messages. that he sends while awaiting his trial. that he orchestrated the theft of billions of dollars in customer deposits.

Manhattan Federal District Court Judge Lewis A. Kaplan issued his instructions in a hearing on Thursday, two days after rejecting a deal Manhattan federal prosecutors had reached with lawyers for Mr. Bankman-Fried that allegedly limited its ability to use certain encrypted messaging. services like Signal.

Judge Kaplan said the proposal had ‘only sparked more questions in my mind’, explaining that it did not completely eliminate the possibility for Mr Bankman-Fried to send messages that he could then DELETE.

“I’ve read all the spy novels,” Judge Kaplan said.

The back and forth in court stemmed from a dispute over the terms of Mr Bankman-Fried’s bail. Prosecutors sought additional terms last month after presenting evidence in court papers that Mr Bankman-Fried had sent messages via email and the Signal messaging app to Ryne Miller, the general counsel for the American branch of FTX. In court filings, prosecutors said Mr. Miller, who was not identified by name, could be a potential witness against Mr. Bankman-Fried.

They asked the judge to block Mr. Bankman-Fried from contacting former FTX employees and using Signal or other encrypted apps, arguing that the technology could allow Mr. Bankman-Fried to secretly engage in witness tampering.

Lawyers for Mr Bankman-Fried have denied trying to influence a witness. But after Judge Kaplan temporarily imposed the new restrictions, defense attorneys reached an agreement with prosecutors to ban Mr. Bankman-Fried from using certain encrypted apps, but explicitly allow him to engage in other cryptocurrency. other forms of electronic communication.

At the hearing, Judge Kaplan said he was unhappy with the deal, noting “I’m much less concerned about the convenience of the defendant.” He gave both sides until Tuesday to submit a new proposal and until February 21 to finalize it.

A lawyer for Mr Bankman-Fried said there are commercial products available that retain messages even if they are deleted, and this could be a solution to address Judge Kaplan’s concerns.

Mr. Bankman-Fried, 30, a once-high-flying crypto executive, was arrested in December for using billions of dollars in FTX client deposits to fund political contributions, lavish real estate purchases and business operations in his hedge fund.

He lives at home with his parents in Palo Alto, Calif., after reaching a $250million bond deal late last year. The terms of the bail required him to be confined to his parents’ home and to wear an electronic ankle monitoring device.

The bail conditions drew criticism, in part because Mr Bankman-Fried was allowed to return home without paying any real money upon his release. The court entered a letter on Tuesday from a retired detective from New Haven, Connecticut, who asked Judge Kaplan to reconsider house arrest given the scale of Mr. Bankman’s apparent theft- Fried and the misuse of billions of customer money.

Mr. Bankman-Fried’s bond was secured largely by his parents’ $4 million house. Two anonymous people unrelated to him also agreed to guarantee the bond with a much lower amount of guarantee. In theory, these people and Mr. Bankman-Fried’s parents would be liable for the full $250 million if Mr. Bankman-Fried absconds.

Last month, Judge Kaplan granted a request from nearly a dozen news agencies, including the New York Times, to unseal the names of the two people who had secured Ms. Bankman-Fried alongside his parents. Lawyers for Mr. Bankman-Fried filed an appeal on Tuesday seeking to keep the names confidential.

Unlike the vast majority of defendants awaiting trial, Mr. Bankman-Fried has not remained silent. He met journalists at his home, in some cases giving taped interviews. He also posted on Twitter and on his personal Substack page.

In most of his posts, Mr. Bankman-Fried has maintained his innocence and insisted that FTX has far more assets than his bankruptcy attorneys have said.

Mr Bankman-Fried appeared in court on Thursday wearing a navy blue suit and a blue and white striped tie. The government is not paying for Mr. Bankman-Fried’s trip to federal court in New York, a spokesperson for the US attorney’s office in Manhattan said.

At one point in the hearing, Judge Kaplan remarked that he had recently read how Mary, Queen of Scots had written some of her letters in encrypted code and that researchers had finally found a way to decipher them. Prosecutors said they weren’t as concerned about Mr. Bankman-Fried’s handwritten communications as they were about the email messages.

But Judge Kaplan retorted: “You don’t think this defendant is smart enough to encrypt something without a computer?