Sam Bankman-Fried needs tighter bail limits, judge says

A federal judge on Thursday ordered attorneys for Sam Bankman-Fried, the disgraced founder of bankrupt cryptocurrency exchange FTX, to create a plan with prosecutors that would ensure Mr. Bankman-Fried doesn’t delete any text messages he sent while awaiting trial He orchestrated the theft of billions of dollars in customer deposits.

Judge Lewis A. Kaplan issued his orders at a hearing in Manhattan federal district court two days after he rejected an agreement that federal prosecutors in Manhattan reached with attorneys for Mr. Bankman-Fried to limit his ability to use certain encrypted messaging services such as limit the signal.

Judge Kaplan said the proposal “did nothing except spark more questions in my mind,” explaining that it doesn’t completely eliminate the potential for Mr. Bankman-Fried to send messages that he might later delete.

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

The court back-and-forth arose out of a dispute over the terms of Mr. Bankman-Fried’s bail. prosecutors wanted additional requirements last month after presenting evidence in court filings that Mr Bankman-Fried had emailed and signaled messages to Ryne Miller, the general counsel of FTX’s US arm. In court filings, prosecutors said Mr Miller, who has not been identified by name, could be a potential witness against Mr Bankman-Fried.

They asked the judge to stop 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 covertly manipulate witnesses.

Mr Bankman-Fried’s attorneys denied that he attempted to influence a witness. But after Judge Kaplan temporarily imposed the new restrictions, defense attorneys and prosecutors agreed to bar Mr. Bankman-Fried from using certain encrypted apps but specifically allow him to engage in other forms of electronic communications.

At the hearing, Judge Kaplan said he was not happy with the agreement, noting, “I am far less concerned about the comfort of the defendant.” He gave both parties until Tuesday to submit a new proposal and until March 21. February to make it final.

An attorney for Mr. Bankman-Fried said some available commercial products would keep messages even if they were deleted and could be a solution to address Judge Kaplan’s concerns.

Once a high-flying crypto executive, Mr Bankman-Fried, 30, was arrested in December on charges of using billions of dollars in FTX customer deposits to fund political donations, lavish real estate purchases and trades in his hedge fund.

He lives with his parents in Palo Alto, California, after hitting a $250 million bail agreement late last year. The terms of the bail package required him to remain locked up at his parents’ home and wear an electronic surveillance device on his ankle.

The bail conditions have been criticized, in part because Mr Bankman-Fried was allowed to move home without actually posting any money at the time of his release. The court on Tuesday added to the case list a letter from a retired detective in New Haven, Connecticut, asking Judge Kaplan to reconsider the house arrests given the scale of Mr Bankman-Fried’s apparent theft and misuse of billions of dollars in client funds.

Mr. Bankman-Fried’s bond was largely backed by his parents’ $4 million home. Two unnamed individuals who are not related to him also agreed to collateralize the bond at much lower security. In theory, these people and Mr. Bankman-Fried’s parents would be liable for the entire $250 million if Mr. Bankman-Fried escaped.

Last month, Judge Kaplan granted a request from nearly a dozen news organizations, including the New York Times, to unseal the names of the two individuals. Lawyers for Mr Bankman-Fried appealed Tuesday to keep the names confidential.

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

In most of his offices, Mr. Bankman-Fried has maintained his innocence and has insisted that FTX has many more assets than his bankruptcy attorneys have claimed.

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

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

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