FTX Founder Sam Bankman-Fried has been out on bail since December, but no longer as of Friday. Bankman-Fried is now in jail for tampering with witnesses.
The fallen cryptocurrency kingpin’s trial on federal financial fraud and conspiracy charges - on a scale that could land him in jail for the rest of his life if convicted - is set for October.
The defendant had been living at his parents’ California home under a severely tight $250 million bail package that restricted his use of phone and internet.
As a result of the witness tampering evidence that prosecutors proffered to the court, Judge Lewis A. Kaplan in the U.S. District Court in New York on Friday admonished the cryptocurrency executive in court by revoking his bail, and immediately remanded the defendant into the custody of the U.S. Marshalls, who led him out of the courtroom in handcuffs.
But, before his exit, Judge Kaplan addressed the court at length why he believed Bankman-Fried had repeatedly pushed the boundaries of his $250 million bail package and crossed the line to the point that Kaplan could no longer defend the bail package and guarantee the protection of the prosecutors' witnesses unless he was behind bars.
Kaplan said there was probable cause to believe Bankman-Fried had tried to “tamper with witnesses at least twice” since his December arrest.
In January, Bankman-Fried reached out to the FTX’s General Counsel by an encrypted communication and most recently he showed private writings of his former girlfriend, Caroline Ellison, to a New York Times journalist.
Judge Kaplan said he concluded there was a probability that Bankman-Fried had tried to influence both witnesses “and quite likely others whose names we don't even know” to get them to “back off, to have them hedge their cooperation with the government.”
Bankman-Fried’s lawyer claimed his client’s actions and motives were innocent and he was just trying to defend his reputation. The judge found that implausible.
The judge noted that the strict rules did not stop him from reaching out in January to a top FTX lawyer, saying he “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.”
In February at a hearing, Judge Kaplan said the communication “suggests to me that maybe he has committed or attempted to commit a federal felony while on release.”
On Friday, Judge Kaplan declared that he was rejecting defense claims that the communications were benign.
It seemed to be an invitation for the FTX general counsel “to get together with Bankman-Fried” so that their recollections “are on the same page,” concluded the judge.
Bankman-Fried’s attorney Mark Cohen requested the court to suspend his client’s incarceration due to an immediate appeal. Judge Kaplan denied that request. Within an hour of the court’s decision, Bankman-Fried’s defense lawyers had filed a notice of appeal.
Bankman-Fried now sits in Metropolitan Detention Center in Brooklyn.
Federal prosecutors argued in a court pleading that Bankman-Fried deserved a bail revocation ruling followed by incarceration because he also shared Caroline Ellison’s personal documents.
Caroline Ellison pleaded guilty in December to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering. Her admissions carry a potential penalty of 110 years behind bars. Ellison is a key witness because she previously headed Bankman-Fried’s Alameda Research hedge fund. She has agreed to cooperate with the prosecutors, and by doing so, she may receive a more lenient sentencing.
Bankman-Fried asserted that Ellison’s private writings were “detrimental to her.”
Prosecutors accused Bankman-Fried of sharing the documents with the New York Times "in order to affect the public's perception of her.”
"The record here establishes that the defendant went beyond benignly exercising a constitutional right to speak to the press -- he took covert steps intended to improperly discredit a trial witness and taint the jury pool," prosecutors argued. "[T]he Government seeks the only appropriate relief consistent with the defendant's escalating evasions of his bail conditions: that bail be revoked and the defendant be detained pending trial."
Not only did Judge Kaplan agree with the prosecutors, but made a stronger statement.
The judge concluded in court Friday that Ellison’s writings which Bankman-Fried shared with the New York Times for whatever reason were communications that no one “would be very unlikely to share with anybody, lest The New York Times, except to hurt, discredit, and frighten the subject of the material.”
Judge Kaplan also has imposed a gag order barring public comments by any individual participating in the October trial. That includes Bankman-Fried as he now awaits his trial in jail.
Bankman Fried’s December 2022 $250 million bail package had been a personal recognizance bond signed by his parents and secured by their Palo Alto, California, home.
Bankman-Fried pleaded not guilty to 13 charges of fraud, conspiracy and bribery, and misappropriation of billions of dollars before FTX went bankrupt and other charges.
Prosecutors have alleged the monies the defendant used to cover losses at Alameda Research were used to buy multi-million dollar real estate properties and for political donations, which made him a darling in Washington, D.C.’’s political circles.
A campaign finance charge against Bankman-Fried had been dropped recently after Bahamian officials claimed that they did not take the campaign finance charge into consideration for Bankman-Fried’s extradition to the U.S.
Subsequently, the US prosecutors wrote a letter to the court and claimed it is the prosecutors’ intention to file a superseding indictment against Bankman-Fried next week. The prosecutors intend to incorporate Bankman-Fried's alleged campaign finance scheme into his existing charges.
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