Sam Bankman-Fried, the disgraced founder and former CEO of collapsed cryptocurrency exchange FTX, was sent to jail ahead of his trial after a federal judge revoked his release bond on Friday.
Lewis Kaplan, the U.S. District Court Judge for the Southern District of New York, has charged the crypto fraudster with multiple financial crimes, including conspiracy to commit securities and derivatives fraud, money laundering, and illegal campaign financing, among others.
Now the court has accepted a filing from Justice Department to revoke the 31-year-old’s bail for allegedly attempting to tamper with witnesses.
Crypto Conman Bankman-Fried Remanded Until Trial for Witness Tampering
The Department of Justice (DoJ) sought to revoke the 31-year-old’s bail after they alleged that the former billionaire violated his bond terms by trying to tamper with multiple witnesses.
In its court filing, the Justice Department said that they had to modify Bankman-Fried’s bail conditions after he tried to contact Ryne Miller, the former general counsel of FTX U.S. (American subsidiary of FTX), and used a virtual private network (VPN), which in the words of his defense team, was to watch the Super Bowl game.
But the most serious of the allegations was the conman leaking details of his former girlfriend and business associate Caroline Ellison’s private diary with a New York Times journalist.
Ellison, who was the former chief executive of FTX’s sister firm and crypto hedge fund Alameda Research, is one of several former business partners who had agreed to a plea deal with the DoJ to testify against him.
The New York Times even went on to publish an article sympathizing Bankman-Fried that included Ellison’s private musings. This led to the Justice Department seeking an outright ban on all-out-of-court statements made by witnesses and other parties in the FTX case.
In a request made to the court, U.S. Attorneys wrote that by sharing Ellison’s personal writings recorded on a private Google document with the media, Bankman-Fried had violated “the core concern” of Rule 23.1 – which prohibits lawyers and their agents from releasing non-public information about a case if it is likely to interfere with the trial.
The attorneys argued that a court order restricting extrajudicial statements was necessary due to the media attention the case had garnered and the defendant’s attempt to manipulate the media coverage to his advantage.
Federal prosecutors fear that Bankman-Fried’s actions may affect the jury pool and lead to public harassment of Ellison, which would stop other potential witnesses in the case from testifying due to fear of humiliation and personal discrediting.
Judge Says Bankman-Fried Leaked Documents With Intent to Discredit Ellison
Judge Kaplan sided with the DoJ’s claim that Bankman-Fried was trying to cover his tracks by allegedly leaking personal documents belonging to Ellison to the NYT journalist who reviewed them in person before publishing. Kaplan added that the writings were disclosed with the intention to “hurt, discredit, and frighten the subject of the material.”
Responding to the DoJ’s arguments, Bankman-Fried’s lawyers said the government was painting their client in a negative light to mischaracterize his actions. Last Tuesday, the defense team requested for the court to provide him with regular access to a computer and internet due to the case involving thousands of documents that need to be reviewed by the former CEO.
Bankman-Fried’s lawyers also argued that their client had the right to defend his reputation in the press and did not initially reach out to Miller.
The defense team agreed to a gag order that would limit his contact with personnel outside of the case. As per the evidence submitted in court, Bankman-Fried had exchanged 100 emails and 1,000 phone calls with various journalists, of which 100 phone calls were made to the NYT author who wrote the article discrediting Ellison.
Federal prosecutors also cited that he attempted to destroy all pieces of evidence that links to him communicating with outsiders by setting up his phone to auto-delete calls and messages and also using a VPN to subvert monitoring.
On Friday, Judge Kaplan said that a gag order was not sufficient, given Bankman-Fried’s history of being “willing to risk crossing the line.” In his conclusion statement, the judge added that there was “probable cause” to believe that the defendant made attempts to tamper with witnesses at least twice.
After the ruling, U.S. Marshals handcuffed Bankman-Fried and escorted him outside the courtroom. He is temporarily being remanded to the Metropolitan Detention Center in Brooklyn, New York. Bankman-Fried will remain in custody until his trial, which is scheduled for October 3. In the meantime, his lawyers will seek out details of how to get him to review the documents from jail.
Bankman-Fried’s lawyers have since filed a notice of appeal.
“The Next Warren Buffet” Masterminded One of the Biggest Financial Frauds in History
The criminal, whom Fortune Magazine dubbed “the next Warren Buffet”, was arrested in December after masterminding one of the biggest financial frauds in U.S. history. He and his partners – Ellison, Gary Wang, and Nishad Singh – are accused of siphoning billions of dollars in customer deposits from FTX exchange to hedge fund Alameda Research to finance risky bets, make campaign contributions to American politicians in attempts to influence crypto policy, and underwrite a luxury lifestyle for themselves and their employees in the Bahamas.
FTX, which was once valued at $32 billion and was regarded as the third-largest crypto trading platform in the world, collapsed in November 2022 after its relationship with Alameda Research was revealed.
Investors and customers, who were under the impression that the investment firm was only an FTX client, panicked and rushed to withdraw their funds, causing a bank run that forced the crypto platform to halt withdrawals and lock up funds.
It was reported that almost $10 billion worth of customer and investor funds were mismanaged by Bankman-Fried and his partners. Both FTX and Alameda Research filed for Chapter 11 bankruptcy protection soon after and came under the investigation of the federal government.