Jul 26, 2023

Sam Bankman-Fried Hit With Interim Gag Order Ahead of Fraud Trial

Ava Benny-Morrison and Bob Van Voris, Bloomberg News

Sam Bankman-Fried, co-founder of FTX Cryptocurrency Derivatives Exchange, leaves court in New York, US, on Wednesday, July 26, 2023. Bankman-Fried faces a total of 13 counts ranging from conspiracy to commit wire fraud to conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act, and faces more than 155 years in prison if convicted of all of them - although any sentence is likely to be much lower if he is found guilty. , Bloomberg

(Bloomberg) -- FTX founder Sam Bankman-Fried was hit with an interim gag order ahead of his fraud trial, after prosecutors argued he can’t be trusted not to taint the proceedings even under house arrest.

US District Judge Lewis Kaplan is weighing whether to rescind Bankman-Fried’s $250 million bail deal. Under that arrangement, Bankman-Fried is restricted to his parents’ house with curbs on his communications. At a hearing Wednesday in federal court in Manhattan, Kaplan restricted his ability to discuss the case and ordered briefs on the matter by Tuesday.

The interim order bars Bankman-Fried from discussing publicly the credibility of witnesses, information that isn’t admissible at trial and anything else that could influence public opinion about his October trial.

“I am certainly very mindful of his First Amendment rights, and I am very mindful of the government’s interests in this issue,” Kaplan said. “Which I take seriously, and I say to Mr. Bankman-Fried, you better take it seriously, too.”

Diary Excerpts

Bankman-Fried, 31, was charged in December with crimes including conspiracy and wire fraud for allegedly misusing billions of dollars in customers’ funds before the spectacular implosion of his crypto empire. He has pleaded not guilty.

He came under scrutiny last week following a New York Times story about diary excerpts written by Caroline Ellison. Ellison is the former CEO of Alameda Research, FTX’s hedge fund affiliate, and Bankman-Fried’s ex-girlfriend. She has pleaded guilty to fraud and is cooperating with prosecutors.

Read More: Bankman-Fried Leaked Ex’s Writings to Discredit Her, US Alleges

Prosecutor Danielle Sassoon told Kaplan at Wednesday’s hearing that Bankman-Fried passed along documents not in the public record and not deemed admissible in the case. Sassoon said the alleged leak of the documents was “an escalation of an ongoing campaign with the press that has crossed the line.”

Warning to Witnesses?

“Even if you take away the internet and phone from the defendant, where there is a will there is a way,” Sassoon told the judge.

Sassoon argued that the allegedly leaked material was meant to “intimidate Ms. Ellison” and to serve as a warning to other witnesses.

Sassoon said Bankman-Fried had sent more than 100 emails to various journalists and had about 100 calls with the Times. His phone and email use has been monitored while he has been out on bail.

His lawyer Mark Cohen told the judge that he had learned one minute before Wednesday’s hearing that the government had changed its position and wanted his client detained. He said Bankman-Fried had spoken to the Times reporter as “someone trying his best to protect his reputation, believing he can.”

“The notion this could have tainted the jury pool is really — it doesn’t seem viable in light of everything that has gone on,” Cohen said.

Risk of Jail

The judge ordered the hearing last week and said he would consider the “adequacy and continuation” of Bankman-Fried’s package, suggesting the house arrest arrangement could be in jeopardy.

The Times story was based on Ellison’s writings in Google Docs and personal journals. The excerpts appeared to reveal ambivalence about her role at FTX and her relationship with Bankman-Fried. Prosecutors wrote a letter to Kaplan accusing Bankman-Fried of leaking the material to the newspaper to “cast Ellison in a poor light, and advance his defense through the press.”

Bankman-Fried’s lawyers said in a letter filed Sunday that their client had shared documents obtained before his arrest “to give his side of the story about topics that have already been reported in the media.”

Earlier Trouble

It’s not the first time Bankman-Fried has had to defend his behavior while he prepares for trial. Kaplan has been skeptical of the bail arrangements, warning earlier that the FTX founder could end up in jail if he didn’t rein in his use of encrypted messaging apps and VPN programs.

Read More: Bankman-Fried Must Have Guard, Metal Detector Under Revised Bail

Bankman-Fried has been living under house arrest as part of a bail package negotiated following his arrest in December. He has seen the conditions tightened already. Visitors to the house must hand in their electronic devices to a security guard at the front door, and his internet usage is heavily monitored.

He was banned from using encrypted messaging apps and contacting witnesses after he emailed FTX’s new CEO in the wake of the company’s failure and messaged a potential witness.

The case is US v. Bankman-Fried, 22-cr-673, US District Court, Southern District of New York (Manhattan).

(Updates with judge’s interim gag order.)