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  • Writer's pictureThe San Juan Daily Star

Sam Bankman-Fried sent to jail after judge revokes bail

Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, arrives for a bail hearing at Federal District Court in Manhattan, Friday, August 11, 2023.

By David Yaffe-Bellany and Matthew Goldstein

Sam Bankman-Fried, founder of the collapsed cryptocurrency exchange FTX, was sent to jail late last week after a federal judge in New York revoked his bail, accusing him of trying to influence witnesses who are poised to testify against him at a widely anticipated trial in less than two months.

Bankman-Fried, 31, had been under house arrest at his parents’ home in Palo Alto, California, since he was arrested in December on fraud charges stemming from FTX’s implosion. But at a hearing Friday, Judge Lewis Kaplan of U.S. District Court in New York, said that arrangement would have to end, after prosecutors argued that Bankman-Fried had twice tried to interfere with witnesses in the case, including by giving documents to reporters.

“He has gone up to the line over and over again, and I am going to revoke bail,” Kaplan said from the bench.

After the order was read aloud, two U.S. marshals had Bankman-Fried remove his tie and navy suit jacket as they prepared to handcuff him. His mother, Barbara Fried, in attendance with his father, tried to approach him, but a court officer cautioned her to stand back. He was taken to the Metropolitan Detention Center in Brooklyn.

One of Bankman-Fried’s lawyers, Mark Cohen, said in court that he intended to appeal. Kaplan said he wouldn’t wait for the outcome of that effort before sending Bankman-Fried to jail.

The courtroom scene was the latest humiliating blow to Bankman-Fried since his cryptocurrency company fell apart in one of the most stunning corporate crashes in recent history. FTX rode the highs of the virtual currency market to become one of the industry’s leading companies before filing for bankruptcy after a run on deposits last fall. Over a few weeks, Bankman-Fried went from being an industry titan courted by politicians and celebrities to a criminal defendant facing decades in prison.

Now he will have to prepare for his trial, scheduled to begin Oct. 2, from a jail cell.

The court dispute over his bail focused on a New York Times article, published last month, that described private writings by Caroline Ellison, an executive in Bankman-Fried’s business empire who had also dated him. Ellison has pleaded guilty to fraud charges and agreed to cooperate with prosecutors investigating Bankman-Fried.

In court filings, prosecutors said Bankman-Fried had given the documents to the Times to intimidate Ellison by casting her in a negative light before his trial. They also noted Bankman-Fried’s numerous conversations with others in the media, including author Michael Lewis, who is writing a book about FTX that is set for publication the week the trial begins.

As the bail issue was debated in court filings over recent weeks, Kaplan imposed a temporary gag order preventing the FTX founder and his representatives from speaking to the media.

Lawyers for Bankman-Fried said that by giving the documents to the Times, he had been exercising his right to answer “an inquiry from the media” and had not breached the terms of his bail agreement. The Times, the Reporters Committee for Freedom of the Press and a documentarian making a film about Bankman-Fried each submitted a court filing raising First Amendment concerns about the gag order.

The status of the order was not immediately clear after Bankman-Fried was sent to jail Friday. But in court, Kaplan said that “defendant speech is not protected if it is to bring about a crime.”

He said he had concluded that Bankman-Fried’s communication with the media and a separate attempt to contact a former FTX employee were intended to “intimidate or also to influence” witnesses in the case.

A spokesperson for Bankman-Fried declined to comment. A spokesperson for the U.S. attorney’s office for the Southern District of New York, which is prosecuting Bankman-Fried, did not respond to a request for comment.

Bankman-Fried was arrested in the Bahamas, where FTX was based, after the company collapsed during a turbulent week in November. He was charged with using customers’ deposits to finance lavish real estate purchases, political donations and charitable initiatives. After a few days in jail in the Bahamas, he was extradited to the United States and released on highly restrictive bail conditions that required him to wear an ankle monitor and confined him to his parents’ house. He has pleaded not guilty.

Since his release, Bankman-Fried has been reprimanded repeatedly for behavior that prosecutors said pushed the boundaries of what he was allowed to do while awaiting trial.

In court filings in January, prosecutors presented evidence that he had sent messages to a former FTX executive who could be a witness in the case, asking to speak with him. They also said Bankman-Fried had used a virtual private network, or VPN, a tool they claimed could disguise how he was using the internet while awaiting trial.

At the time, Kaplan ordered Bankman-Fried to submit to tighter bail requirements that restricted which websites he could use and prevented him from communicating with former FTX employees. Visitors to his parents’ house were prohibited from taking phones or computers inside.

The Times’ article about Ellison included excerpts from private Google documents addressed to Bankman-Fried, with raw reflections on their relationship and her insecurities about her role as CEO of Alameda Research, a hedge fund that Bankman-Fried founded. In court, prosecutors argued that the sensitive nature of the writings showed that Bankman-Fried was seeking to intimidate and discredit his former girlfriend.

For Kaplan, the article about Ellison was the final straw. Bankman-Fried’s messages to the former FTX executive, who served as general counsel of the firm’s U.S. arm, seemed designed to get him to “sing from the same hymnbook,” Kaplan said Friday. And by sharing documents with the Times, he said, Bankman-Fried intended to “portray Ms. Ellison in an unfavorable light.”

As Bankman-Fried’s lawyers fought to keep the bail agreement in place, they argued that conditions at the Brooklyn detention center would make it difficult for him to prepare for the trial.

Kaplan said he was open to the possibility of transferring Bankman-Fried to a facility that would offer more consistent internet access, such as a detention center in Putnam County, New York. He said he was also willing to consider an arrangement that would allow Bankman-Fried to meet with his lawyers at their office, under heavy security.

For now, though, Bankman-Fried will be housed at the federal facility in Brooklyn. In court filings, his lawyers argued that the jail was facing a “staffing crisis” and that people held there typically had limited computer access.

The location is “not on anyone’s list of five-star facilities,” Kaplan acknowledged Friday.

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