Sam Bankman-Fried is no longer allowed to contact FTX and Alameda employees or use encrypted communications, U.S. District Judge Lewis Kaplan ordered Wednesday.
The restriction was put into place following claims made Friday that the disgraced crypto mogul had contacted a potential witness earlier this month via the encrypted messaging platform Signal, seeking to establish a more favorable relationship.
The court plans to let both legal teams make arguments for or against the measure—originally put forth as a bail modification—on Feb. 7, but Judge Kaplan found it was “clearly and convincingly sufficient” to impose the restrictions until a further determination could be made, a recent filing states.
Federal prosecutors had said the conduct of Bankman-Fried may amount to “witness tampering” when he reached out to “the current General Counsel of FTX US”—a person with close knowledge of his conduct leading up to the collapse of FTX in November of last year but listed in a recent filing only as “Witness-1.”
“I would really love to reconnect and see if there’s a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other,” U.S. prosecutors alleged Bankman-Fried wrote.
FTX, founded by Bankman-Fried, filed for bankruptcy in November following a run on the exchange that was triggered by a steep drop in the price of the exchange’s native cryptocurrency FTT. The run on FTX revealed it did not have one-to-one reserves of customer assets, could not honor withdrawals, and forced it to file for bankruptcy.
Bankman-Fried was then arrested and charged with eight financial crimes in connection with the collapse of the exchange. On January 3, he pleaded not guilty to the charges and now awaits a trial scheduled for October. It’s alleged he misappropriated billions of dollars worth of customer funds to donate to political campaigns, purchase private real estate, and fuel trades at his trading firm Alameda Research.
With regard to the allegations of witness tampering, Bankman-Fried did not contest the fact that he reached out to an employee of FTX, but his legal team argued the former CEO’s efforts were “merely an innocuous attempt to offer assistance in FTX’s bankruptcy process and does not reflect misconduct.”
But Judge Kaplan didn’t view Bankman-Fried’s recent actions in a “benign way,” stating in a court order that “it appears to have been an effort to have both the defendant and Witness-1 sing out of the same hymn book.”
The attempt to speak with “Wittness-1” using Signal took place on January 15 and was accompanied by an email, prosecutors said. While still unnamed, Ryne Miller is FTX US’s current counsel. And the FTX’s founder’s counsel did not dispute that “since his release, [Bankman-Fried] has contacted other current and former FTX employees.”
SBF to 'Witness 1' pic.twitter.com/A0jTsAVFn2
— db (@tier10k) January 30, 2023
As part of their basis for restricting his use of encrypted or “ephemeral” communications–including messages or calls—federal prosecutors said Bankman-Fried had told former CEO of Alameda Caroline Ellison he was aware “that many legal cases turn on documentation.”
One element of newly enforced restrictions specifically states Bankman-Fried is prohibited from contacting current and former employees of FTX or Alameda without a lawyer present unless given permission by the government, and it does not apply to immediate family members like Joseph Bankman–Bankman-Fried’s father who was a paid employee of FTX.
When the FTX founder’s legal team countered the bail amendment put forth by federal prosecutors, they urged Judge Kaplan to reverse a previous change made to the agreement that let Bankman-Fried stay at his parents’ home in Palo Alto, California, as he awaits his criminal trial.
The prior modification barred Bankman-Fried from accessing funds or digital assets belonging to FTX and Alameda, a change put into place on the day of his arraignment, where he pleaded not guilty to a myriad of financial crimes, including federal wire fraud, securities fraud, and money laundering.
Additionally, Bankman-Fried’s counsel called the new bail modification “overbroad” and “unworkable,” arguing it would restrict the FTX founder’s ability to speak with his therapist, necessitating a lawyer be present, as an example.