Sam Bankman-Fried Faces New Scrutiny for Pretrial Conduct

The road to a jury trial has been a bumpy one for indicted FTX founder Sam Bankman-Fried, who faces a mandatory appearance before a judge Wednesday amid renewed concern about his behavior while out on bail.

U.S. District Judge Lewis Kaplan in Manhattan called the hearing after federal prosecutors last week alleged the former crypto star attempted to interfere with the criminal proceedings and influence potential jurors by trying to discredit his former colleague and girlfriend Caroline Ellison. Bankman-Fried, they said, shared some of Ellison’s private Google documents with the New York Times.

The Justice Department is now seeking a gag order that would prevent Bankman-Fried from saying anything about the case that could interfere with a fair trial. Kaplan called the hearing to discuss whether Bankman-Fried’s bail conditions are adequate.

The hearing is 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 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 have characterized the interaction as innocuous outreach to a colleague and said that he was using a virtual private network to watch football online. 

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

Prosecutors haven’t said whether they plan to seek additional restrictions beyond a gag order. Bankman-Fried’s lawyers have said his actions haven’t been nefarious. 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.

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.

Bankman-Fried’s lawyers said in a court filing that they would accept a gag order but asked the judge to also apply it to current and former employees of FTX and Bankman Fried’s crypto-investment firm, Alameda Research. The lawyers argued that Bankman-Fried had a First Amendment right to counter public attacks against him, including from John J. Ray III, FTX’s current chief executive. They said Ray has vilified Bankman-Fried in public comments and filings in the crypto-exchange’s bankruptcy proceedings. A spokesman for Ray didn’t respond to a request for comment. 

Both prosecutors and Bankman-Fried’s lawyers agree his case has garnered media attention. His lawyers said in their filing that more than one million stories, YouTube videos and podcasts about FTX and Alameda Research have been published since November 2022. 

Timothy Howard, a former federal prosecutor, said a gag order is rare in a white-collar case, as most defendants follow the advice of their lawyers to keep quiet while awaiting trial. Bankman-Fried, favoring a different approach, has at times been vocal publicly in defending his actions.

“It’s an acute problem in this kind of case because it is so high profile,” said Howard, a partner at Freshfields Bruckhaus Deringer. 

Judges typically will only send defendants to jail if they are a danger to the community or clearly violate bail conditions, said Eric Rosen, a former federal prosecutor.

“Most judges give people multiple chances to make sure they are irredeemable and can’t listen to the judge’s directions,” said Rosen, now at law firm Dynamis. “They will usually just get yelled at.”

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