FTX’s Sam Bankman-Fried headed to jail for violating bail conditions

Sam Bankman-Fried (SBF), disgraced founder of the collapsed FTX digital asset exchange, is heading to jail for violating the terms of his bail, a U.S. federal judge has ordered.

On Friday, U.S. District Judge Lewis Kaplan ordered SBF to be held in custody ahead of his October 2 trial date. SBF, who has been under house arrest at his parents’ home in California since being extradited from the Bahamas last December, learned his fate following a hearing in New York.

The hearing was called after federal prosecutors accused SBF of repeatedly violating the conditions of his bail. Prosecutors detailed a long list of SBF’s blatant disregard for the conditions of his release, including alleged witness tampering, use of a virtual private network (VPN) in violation of his strict digital lockdown and leaking the private writings of his former girlfriend Caroline Ellison to a New York Times reporter.

Ellison, the former CEO of FTX’s affiliated market-maker Alameda Research, is also SBF’s former girlfriend. Ellison has pleaded guilty for her role in the massive FTX/Alameda fraud and is cooperating with prosecutors in their case against SBF. Her former beau evidently gave the Times reporter Ellison’s diaries in a bid to paint her as unstable and thus diminish the impact of testimony against him.

Kaplan, who’d previously warned SBF to “seriously” prepare for Friday’s hearing, said Friday that he was sufficiently convinced that SBF had attempted to “tamper with witnesses at least twice” since he was formally charged with fraud (wire/securities/commodities) and money laundering conspiracy. (A separate trial on charges of bank fraud and bribing foreign officials will commence in the spring.)

SBF’s legal team tried to argue that SBF was simply trying to defend his reputation against the mountain of vitriol directed his way since he was exposed as a fraud and a thief of his customers’ cash. Despite mountains of evidence detailing his crimes and the post-plea cooperation of nearly all his key lieutenants, SBF continues to maintain his innocence.

SBF’s team asked for an immediate stay of Kaplan’s incarceration order, which he rejected but SBF’s team has already filed an appeal of Kaplan’s order. Reuters reported that SBF was summarily frog-marched out of the court in handcuffs after federal marshals removed his shoelaces, jacket and tie.

SBF’s parents—Alan Joseph Bankman and Barbara Fried—were in attendance at Friday’s hearing. Court documents recently revealed that Bankman received a $10 million transfer from SBF shortly before FTX filed for bankruptcy—funds that almost certainly belonged to FTX customers—and that this money is helping to fund SBF’s legal defense.

F**ked around, found out

A detailed play-by-play of the hearing by Matthew Russell Lee/Inner City Press shows that, when challenged by Kaplan as to whether anything SBF communicated to the Times reporter amounted to speech with criminal intent, Assistant U.S. Attorney Danielle Sassoon replied that just because SBF “was more subtle than a mobster doesn’t mean it’s okay.” Sassoon argued that it’s clear that SBF “is intent on interfering with the integrity of the trial.”

OK – now US v. Bankman-Fried hearing on possible remand of SBF to jail for intimidating witnesses, including leaking Caroline Ellison's Google Docs (still sealed) to the NYT. Inner City Press moved to unseal https://t.co/wkt4FqxJGD & will live tweet, thread below pic.twitter.com/OXW9z4JWsj

— Inner City Press (@innercitypress) August 11, 2023

Kaplan challenged SBF’s attorney Mark Cohen on whether SBF instructed people with whom he communicated to “use the delete function.” Cohen replied: “Not for any improper purpose.” A frustrated Kaplan said, “I guess I’m not going to get a straight answer.” Cohen eventually acknowledged that SBF “would set some of his settings to delete” but denied that SBF instructed others to delete their communications with him.

Sassoon responded by saying her office confirmed this deletion of evidence with another witness “only yesterday.” Sassoon added that SBF communicated to his former colleagues that “not deleting, there was only downside.” Cohen claimed SBF actually said “don’t write things that can be taken out of context.”

At that point, Kaplan said he’d heard enough. Noting that he’d already had to revise SBF’s bail conditions twice, Kaplan said he “didn’t share the defense’s view at the beginning and I don’t share it now.”

Referencing SBF January communications with Ryne Miller, former general counsel of the U.S.-based FTX.US exchange, Kaplan said the intercepted communications read like “an attempt to have them sing from the same hymn book.”

Rejecting Cohen’s argument that SBF shared Ellison’s diaries simply as a means of defending his reputation in the press, Kaplan said “there is a practical possibility it was intended to have [witnesses] back off.”

Kaplan noted that Ellison’s writings “are in part personal and intimate. They are personally oriented, not business oriented.” Kaplan said her writings were something that a former romantic partner “would be very unlikely to share with anybody … except to hurt and frighten the subject.”

Citing SBF’s unauthorized VPN use—which SBF tried to claim was necessary to watch an NFL playoff game that was broadcast on free TV—Kaplan said it “shows the mindset” of someone who evidently believes the rules don’t apply to him.

Saying his previous gag order on SBF was no longer “a workable solution longer term particularly with someone who has shown a willingness and a desire to risk crossing the line in an effort to get right up to it, no matter where the line is… All things considered I am going to revoke bail.”

He got a real purdy mouth, ain’t he?

Kaplan originally ordered SBF to be held at the infamous Metropolitan Detention Center (MDC) in Brooklyn, a venue Kaplan described as “not on anyone’s list of five-star facilities.” Previous celebrity MDC inmates have complained about being served “food with maggots.”

Sassoon said MDC would be fine once the trial was underway, but suggested the Putnam County Correctional Facility might be a better temporary place for SBF to cool his heels. This is based on SBF’s capacity to access the internet, something his team claims is crucial to preparing for trial. Sassoon said it could take “weeks to load a laptop” with the kind of monitoring software required to keep tabs on SBF’s activities.

It remains to be seen whether being deprived (finally) of his creature comforts—his parent’s house is a multi-million-dollar mansion with pool, etc.—will act as a defibrillator for SBF’s brain, at least the part that controls his ability to deny reality. It may even prove the trigger for him to finally cop a plea rather than risk a decade or more in similarly restrictive custody.

With his conviction all but assured—meaning Friday may have been his last day of freedom for a long time—the clock is ticking loudly for SBF to earn himself some sorely needed credit with prosecutors by telling them everything he knows about the two even bigger frauds: the criminal Binance exchange and the unbacked Tether stablecoin. Speak now or forever enjoy your maggot stew.

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