Your freedom can be revoked.
Former FTX CEO Sam Bankman-Fried’s freedom was on the line during a court hearing Thursday as government lawyers and lawyers for the indicted crypto entrepreneur argued over further limiting his access to electronic communications.
At a hearing in Manhattan federal district court, after weeks of negotiations between the parties, U.S. District Court Judge Lewis Kaplan issued a ruling on the prosecution’s request to cut off Bankman-Fried’s Internet access, continuing to express skepticism about the defendant’s access to encrypted communications services.
It is not clear when Judge Kaplan will rule on the request, or why he gave the attorneys more time to resolve the dispute, even as he extended Bankman-Fried’s bail conditions that were ordered Wednesday. He asked Bankman-Fried’s lawyers to consider hiring a technology guru who could provide the court with expertise in device monitoring, and asked that the defendant be prepared to address his lingering concerns by Feb. 24.
“Why am I being asked to turn him loose on this garden of devices,” Judge Kaplan asked during the hearing, where Assistant U.S. Attorney Nicolas Roos proposed cutting off Bankman-Fried’s cell phone, tablet and computer access, including his access to smart -TVs and online video games.
Essentially, the government argued that Bankman-Fried should be banned from the internet to quell concerns that he may be using self-deleting messaging apps and virtual private networks, or VPNs, to communicate with potential court witnesses. After his arrest, Bankman-Fried sent a message to the FTX US General Counsel over Signal and email, as well as other current and former FTX employees. He later used a VPN on January 12, which his lawyers claim was to watch Super Bowl LVII.
“We’re dealing with someone … who has done things that show there is probable cause that he attempted to commit a crime while he was released,” Judge Kaplan said, citing potential witness tampering and potential attempted witness tampering based on on Bankman-Freid’s statement. contacts after the arrest. The judge warned that the former crypto boss’s bail, which gives him the freedom to remain out of custody while awaiting trial, could be revoked.
Under his current bail conditions, Bankman-Fried is required to live in and remain mostly confined to his parents’ home in the Bay Area — and refrain from contact with potential witnesses. The arrangement introduced additional concerns in court with Judge Kaplan questioning whether Bankman-Fried had access to her parents’ unmonitored devices.
“Within one month, the defendant has used at least two methods of encryption in a manner that warrants modification of his bail conditions,” U.S. attorneys wrote in a letter to Judge Kaplan. “His behavior shows that the existing conditions leave too much room for circumventing restrictions aimed at preventing inappropriate behavior, including contact with witnesses and access to cryptocurrency assets.”
Bankman-Fried’s attorney, Mark Cohen, called prosecutors’ proposal “draconian,” warning that it would jeopardize their client’s ability to defend himself. Bankman-Fried is required to use a VPN to access a critical database containing all of FTX’s archived financial data, including customer wallets and company transactions, Cohen said. He added that blocking the former FTX boss from collaborative Google Docs and Microsoft Word would further hinder his defense.
Prosecutors proposed that Bankman-Fried be allowed to use only two specific electronic devices — a laptop and a cellphone — as long as both are monitored by a pen register.
The parties have entered into preliminary agreements to prohibit Bankman-Fried from using features of self-deleting messaging apps, such as those provided by Signal and WhatsApp (META), as well as iPhone iMessage, from manually deleting messages on such messaging platforms, and from contacting certain individuals, with the exception of family members and close friends.
“My client understands what is at stake here,” Cohen told the judge. “He is on trial for life.”
Bankman-Fried faces multiple charges of fraud and conspiracy, as well as allegations of money laundering and campaign finance violations, related to his role as CEO of FTX, an international crypto trading and investment empire now embroiled in bankruptcy proceedings in the United States and the Bahamas.
Prosecutors say FTX and Bankman-Fried misappropriated client funds by secretly allowing the assets to be transferred to the company’s related hedge fund, Alameda Research. Investors in FTX and its related entities, they claim, were defrauded by the same scheme.
The judge has repeatedly referenced Bankman-Fried’s technology practice in remaining skeptical of the government’s willingness to allow limited access to electronic devices.
“You don’t think this defendant is clever enough to encrypt anything without a computer?” Judge Lewis Kaplan asked government lawyers in a hearing last week. After more than 400 years, he said, decoders finally deciphered letters written by the monarch Mary, Queen of Scots.
“I want this to be tight,” Judge Kaplan said.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
