Sam Bankman-Fried risks bail conditions by leaking ex-girlfriend’s diary

Sam Bankman-Fried (SBF) leaked his former girlfriend’s diaries to publicly undermine her credibility on the illegal activities at the bankrupt FTX digital asset exchange.

On July 20, the U.S. Attorney for the Southern District of New York wrote a letter to U.S. District Judge Lewis Kaplan, who is overseeing the criminal trial against SBF for his role in last year’s downfall of FTX and its affiliated market-maker Alameda Research.

The letter accuses SBF of seeking to “publicly discredit a government witness by sharing personal writings” by Caroline Ellison, Alameda’s former CEO and SBF’s ex-girlfriend, with a reporter so that these private documents would be featured in a New York Times article. The article claimed to have seen “documents … [that] offer new insight into Ms. Ellison’s psychology during the final months of FTX.”

While the article didn’t reveal how the Times obtained Ellison’s “private writings,” the government said “it is apparent that documents were shared by the defendant.” The government said it learned just prior to the article’s publication from SBF had met with one of the Times reporters and “shared documents with him that were not part of the government’s discovery material.” Tellingly, SBF’s attorneys claim to have also been in the dark until the government contacted them.

The government argues that SBF’s motive for sharing the documents is “plain … [SBF] is attempting to discredit a witness, cast Ellison in a poor light, and advance his defense through the press and outside the constraints of the courtroom and rules of evidence: that Ellison was a jilted lover who perpetrated these crimes alone.”

The letter says that “in addition to tainting the jury pool, the effect, if not the intent, of the defendant’s conduct is not only to harass Ellison, but also to deter other potential trial witnesses from testifying.” The government reminded Kaplan that SBF’s previous attempts at influencing/intimidating witnesses resulted in further restrictions being added to his bail conditions.

The government is asking Kaplan to issue an order limiting “extrajudicial statements by parties and witnesses likely to interfere with a fair trial by an impartial jury.” On Friday, Kaplan issued an order summoning all parties—including SBF—for a hearing on Wednesday, July 26, to hear arguments from both sides, including “the adequacy and continuation of the current bail conditions.” (More on this below.)

The lengthy Times article details Ellison detailing the difficulties in working so closely with SBF following the demise of their romantic dalliance, but she also confesses to her diary in February 2022 that she’s “feeling pretty unhappy and overwhelmed with my job.” She expresses feelings of imposter syndrome, saying, “Running Alameda doesn’t feel like something I’m that comparatively advantaged at or well suited to do.”

As court documents previously revealed, once the collapse of SBF’s Ponzi empire took on terminal velocity, Ellison wrote SBF a message detailing how she’d long had “increasing dread of this day” coming, but “now that it’s actually happening it just feels great to get it over with.”

Ellison—along with FTX co-founder Zixiao ‘Gary’ Wang and FTX engineering director Nishad Singh—has pleaded guilty to her role in FTX’s downfall and is cooperating with prosecutors. Despite countless internal documents revealing SBF’s omnipresence in FTX/Alameda decisions, SBF has attempted to paint his underlings as acting independent of his oversight.

You’re pushing your luck, little man

SBF’s continued flouting of the accepted norms could lead Kaplan to reject a recent request by SBF’s attorneys to loosen the conditions of their client’s house arrest. On July 13, SBF’s team sent Kaplan a letter requesting that several individuals—submitted on a list under seal—be permitted to visit SBF at his parents’ house in California “without the need for a security guard to be present.”

The letter claims the government “has no objection to this request” for exempting certain unknown individuals—including “close friends and colleagues of [SBF’s] parents and household help that regularly visit the house”—provided they respect “the prohibition on sharing ‘Prohibited Electronic Devices’ with [SBF].”

While the government may have originally ‘consented’ to this request, SBF’s leaking of Ellison’s private thoughts may have reduced their tolerance levels. Kaplan may also not look kindly on SBF’s latest demonstration of his belief that he’s above the law.

The day after SBF’s attorneys submitted their request, an objection was filed by Inner City Press (ICP), which has been covering SBF’s trial in detail. ICP argues that it’s hardly a major imposition to sign a visitor log before entering the Bankman-Fried domicile, and the “main interest” of these unnamed individuals “seems in wanting to not be named.”

More to the point, ICP argues that, without being searched by a court-appointed security guard, the individuals on the secret list could sneak in prohibited electronic devices and thus “assist the defendant in further violations of the restrictions.” For these and other reasons, ICP views SBF’s request to be “treated different than other defendants in this District” as “problematic.” ICP urged Kaplan to hold a hearing to discuss the matter before making a decision, a request that Kaplan has now granted.

Bitch better have my money

Meanwhile, FTX Debtors—the court-appointed group tasked with untangling SBF’s tangled financial web—has filed a new lawsuit trying to reclaim over a billion dollars worth of FTX customer funds that were illegally diverted into the pockets of SBF, Wang, Singh, and Ellison pre-bankruptcy.

The July 20 filing in the U.S. Bankruptcy Court for the District of Delaware largely involves shenanigans that have already been well documented in the criminal and civil cases against SBF. But there are a few new jaw-dropping details that bear mentioning. For instance…

On January 24, 2022, SBF transferred $10 million from an FTX company account at its U.S.-facing offshoot FTX.US to another FTX.US account in SBF’s name. “One minute later,” SBF transferred this $10 million to an FTX.US account registered to SBF’s father, Allen ‘Joe’ Bankman. Shortly after that, Dad made six transfers totaling $6,775,000 to his personal accounts at Morgan Stanley and TD Ameritrade.

“In an email exchange, Bankman-Fried and his father discussed structuring the $10 million gift as a loan from Alameda to Bankman-Fried. However, the debtors have been unable to identify any promissory note, loan agreement, or other indication that the funds were not simply taken from Alameda by [SBF] to enrich his family. On information and belief, [SBF’s] father has been using this ‘gift’ to finance [SBF’s] criminal defense.”

Another eye-opener: a memo between an exec at SBF’s FTX Foundation faux-charitable arm and SBF’s little brother Gabriel Bankman-Fried. The younger Bankman-Fried ran a group called Guarding Against Pandemics, which was lavishly funded with FTX customer cash and, as the filing drily notes, “needless to say, did nothing to prevent pandemics.”

The memo describes a plan to purchase the sovereign nation of Nauru (an eight-square-mile island in Micronesia) in order to construct a ‘bunker/shelter’ that would be used for “some event where 50%-99.99% of people die [to] ensure that most EAs [effective altruists] survive” and to develop “sensible regulation around human genetic enhancement, and build a lab there.” The memo further noted that “probably there are other things it’s useful to do with a sovereign country, too.” No doubt.

Greed sciences

A separate filing by the FTX Debtors seeks to reclaim over $71 million that SBF doled out to a variety of ‘life sciences’ companies. These companies received funds from the FTX Foundation and the Latona Biosciences Group, the latter essentially an SBF investment slush fund. It almost goes without saying nowadays that the millions dispersed by these two groups largely consisted of FTX customer cash.

Worse, while both the FTX Foundation and Latona claimed to be ‘non-profits,’ their investments into this bevy of biotech startups were intended to (a) give SBF a public sheen of altruistic respectability and (b) make major bank for SBF should one of these startups actually develop anything of value and “make a ton of money.”

The filing notes that Latona “conducted minimal or no due diligence” on its investments. One internal communication featured an exec grousing that Ross Rheingans-Yoo (appointed by SBF to run Latona) was pushing for a $5.5 million investment in a startup based on a “random CEO pitching this to Ross at a conference.” Regardless, the $5.5 million was sent, and, in the wording repeated often in the filing, the FTX/Alameda entities “did not receive any value in exchange for this transfer.”

Latona also inherited FTX/Alameda’s ‘ready, fire, aim’ approach to bookkeeping, as detailed in this one exchange between Rheingans-Yoo and the Head of Operations at FTX Ventures.

On May 23, 2022, Rheingans-Yoo sent a Slack message to the Head of Operations for FTX Ventures, asking her to wire $50 million to [Platform Life Sciences] on behalf of Latona, because “Latona doesn’t have a bank account yet, and we’d like to move these funds as soon as possible.” After the Head of Operations inquired why they were wiring $50 million when the [Simple Agreement for Future Equity] was only for $35 million, Rheingans-Yoo said there was a “separate purchase agreement [that] had a $15mln cash advance.” When the Head of Operations asked for the purchase agreement for $15 million, Rheingans-Yoo replied, “I have an email, no formal agreement,” but “If that’s not sufficient, we can send the 35 first and get the purchase more formally papered.”

Three days later, with SBF’s approval, the $50 million was sent to PLS on behalf of Latona.

Beyond satire

Finally, the real-life absurdity of the SBF saga has inspired a new animated “interactive series” called FORTUN3, “loosely based on the implosion of FTX.” The series, which will debut in the final quarter of 2023, is produced by interactive story studio Toonstar and will feature Silicon Valley star T.J. Miller voicing “a character inspired by” SBF, with additional contributions from Napoleon Dynamite’s Jon Heder.

FORTUN3 will be accompanied by “an A.I.-powered companion game in which players develop their characters through a series of life decisions and moral dilemmas in a Sims meets The Game of Life format.” The idea is that the storyline will influence the companion game as the series unfolds, and game players will have “the opportunity for their characters to be picked up for a role in the animated series.”

Not for nothing, but we’d advise the producers to be on the lookout for anyone with the game ID ‘Storybook Brawler’ who tries to argue that SBF has been unfairly maligned and tries to paint an ex-girlfriend as the real culprit behind FTX’s demise.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.