Prosecutors Want Bankman-Fried Jailed Before Fraud Trial

Federal prosecutors asked a judge to revoke FTX founder Sam Bankman-Fried’s bail and send him to jail, ratcheting up a monthslong battle over his behavior while awaiting trial on fraud charges connected to the implosion of his cryptocurrency exchange.

The tipping point, prosecutors said Wednesday during a hearing in New York, was what they allege were Bankman-Fried’s attempts to discredit a former member of his inner circle who is expected to testify against him. Bankman-Fried provided private writings of Caroline Ellison, his onetime lover and former chief executive of his crypto investment firm Alameda Research, to a New York Times reporter that were cited in a story published last week.

“The latest incident is an escalation of an ongoing campaign with the press that has now crossed a line,” Assistant U.S. Attorney Danielle Sassoon said.

Bankman-Fried was trying to intimidate trial witnesses and, if not jailed, could continue to do so, she said.

A lawyer for Bankman-Fried responded that the case had drawn widespread media attention and his client was exercising his First Amendment right to combat negative portrayals of himself. Bankman-Fried is “someone who is trying his best to protect his reputation,” the lawyer, Mark Cohen, said.

U.S. District Judge Lewis Kaplan, who is presiding over the case, withheld a decision on the request but ordered prosecutors and Bankman-Fried’s defense team to submit written arguments in the next several days.

“I am certainly very mindful of his obvious First Amendment rights and I am very mindful of the government’s interest in this issue,” Kaplan said.

“I say to the defendant, Mr. Bankman-Fried, you better take it seriously too,” he added. The judge also issued a temporary gag order on Bankman-Fried, barring him from publicly discussing the case.

Bankman-Fried is scheduled to go to trial on Oct. 2 after being charged in December with stealing billions of dollars from FTX customers while misleading investors and lenders. A second trial on an additional set of charges is tentatively set for next March.

Wednesday’s hearing was the latest in a series of court appearances related to the release conditions for Bankman-Fried, who has been under confinement at his parents’ home in Stanford, Calif., since his release on a $250 million bond in December. Kaplan previously tightened his bail restrictions, including limiting his access to electronic devices, after prosecutors raised concerns that he contacted a potential witness with an encrypted-messaging app and logged on to the internet with a device that masks the true location of a user.

Bankman-Fried’s lawyers characterized the interaction as innocuous outreach to a colleague and said that he was using a virtual private network to watch football online. They acknowledged he met with a Times reporter and provided some information for a story the newspaper was already working on, but denied he acted improperly.

Kaplan previously has raised the possibility of sending Bankman-Fried to jail. “There is a solution, but it’s not one anyone has proposed yet,” the judge said at a February hearing.

Sassoon told Kaplan on Wednesday that records showed Bankman-Fried had 1,000 phone calls with various journalists while under home detention. She also expressed concern about his interactions with author Michael Lewis, who has a book about Bankman-Fried scheduled for release around the start of his trial.

Separately, prosecutors filed a letter to the judge late Wednesday saying that they would drop a campaign-finance charge against Bankman-Fried after the Bahamian government objected to the count. Bankman-Fried was arrested in the Bahamas in December and later transferred to U.S. custody after consenting to his extradition. Prosecutors said the Bahamas informed them earlier Wednesday that it never intended to approve the charge when it allowed his extradition.

Write to Corinne Ramey at [email protected] and James Fanelli at [email protected]