© Reuters. FILE PHOTO: Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, arrives on the day of a hearing at Manhattan federal court in New York City, U.S. January 3, 2023. REUTERS/David D
By Jonathan Stempel
NEW YORK (Reuters) – U.S. prosecutors on Friday asked a Manhattan judge to impose tougher bail conditions on Sam Bankman-Fried, expressing concern that the founder of the FTX cryptocurrency exchange might tamper with witnesses or destroy evidence in his criminal case.
Citing Bankman-Fried’s “recent attempts to contact prospective witnesses,” prosecutors asked U.S. District Judge Lewis Kaplan to ban Bankman-Fried from communicating with current or former employees of FTX or his Alameda Research hedge fund, other than family, unless a lawyer is present.
They also asked that Bankman-Fried not use Signal or other encrypted call and messaging applications, though he could still communicate through text messages, email and the phone.
Bankman-Fried, 30, has been free on $250 million bond and required to live with his parents since pleading not guilty to looting billions of dollars from the now-bankrupt FTX.
Lawyers for Bankman-Fried did not immediately respond to requests for comment.
In Friday’s letter, prosecutors cited a Signal message on Jan. 15 from Bankman-Fried to “Witness-1,” the general counsel of the FTX U.S. affiliate. Bankman-Fried expressed interest in having a “constructive relationship” or “at least vet things with each other.”
Prosecutors said this was “particularly concerning” because Bankman-Fried knew the general counsel had potentially damaging information, having participated just before FTX’s November collapse in communications in which Bankman-Fried discussed using Alameda funds to satisfy FTX customer withdrawals.
“The defendant’s request to ‘vet things with each other’ is suggestive of an effort to influence Witness-1’s potential testimony, and the appeal for a ‘constructive relationship’ likewise implies that Witness-1 should align with the defendant,” prosecutors said.
“Even if the defendant has not directly attempted to tamper with witnesses, (his) contact with witnesses may intimidate them” into not coming forward or testifying, prosecutors added.
In seeking to keep Bankman-Fried off Signal, prosecutors said he had in 2021 directed that many Signal and Slack communications be autodeleted within 30 days.
Prosecutors said former Alameda chief Caroline Ellison, who pleaded guilty in the case and is cooperating with them, told them Bankman-Fried had indicated it could be harder to build legal cases if information were not preserved.
Read More The United States Department of Justice is taking extra steps to ensure that the leader of a major cryptocurrency exchange does not tamper with evidence. Sam Bankman-Fried, the founder of the FTX cryptocurrency exchange, was arrested on April 6th for allegedly facilitating a securities fraud scheme that took place between 2018 and 2020.
The Department of Justice has requested that Bankman-Fried be held without bond or that his bond be significantly higher than the current $250,000. The Department noted that Bankman-Fried has a high risk of tampering with evidence due to his involvement as the founder and CEO of the FTX exchange, possession of vast resources, and access to influential people.
It is reported that Bankman-Fried has cooperated with law enforcement and has pledged to stay in the country and abide by the law. However, the Department of Justice believes the risks associated with his case are too substantial to allow him to remain free on bail.
The New York City District Attorney’s office has also brought civil charges against Bankman-Fried, accusing him on evading various regulations and providing unauthorized advice to investors.
The Department of Justice is asking for a higher bail so that Bankman-Fried does not have access to his resources or influence to tamper with any potential evidence. The United States Attorney’s Office for the Eastern District of New York is leading the investigation, and the Department is taking all necessary steps to make sure that justice is served in this case.
