Judge Bars Sam Bankman-Fried From Contacting FTX Employees

Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, departs from his court hearing at a federal court in New York on Jan. 3, 2023. David Dee Delgado/Reuters

A New York judge on Feb. 1 granted a request from the Department of Justice to block Sam Bankman-Fried from attempting to contact both current and former employees of the failed cryptocurrency exchange FTX.

U.S. District Court Judge Lewis Kaplan also ruled that the block applies to current and former employees of FTX’s sister hedge fund, Alameda Research.

The judge’s decision came after federal prosecutors filed a letter (pdf) with the court on Friday asking for Bankman-Fried’s bail conditions to be updated, citing concerns over possible witness tampering.

In the court filing, Damian Williams, the U.S. attorney for the Southern District of New York, asked that the former FTX founder not be allowed to communicate with any current or former employees unless in the presence of counsel, and that he also be banned from encrypted messaging platforms like Signal.

“The imposition of these new conditions is justified in light of the nature of the case, as well as the defendant’s recent attempts to contact prospective witnesses,” Williams wrote.

Prosecutors, in their letter to the court, claimed that Bankman-Fried had on Jan. 14 contacted the general counsel of the FTX U.S. affiliate, referred to in court papers as “Witness-1” via Signal, as well as by email.

Lawyers Allege Bankman-Fried Contacted FTX Employee

His message, according to prosecutors, read, “I would really love to reconnect and see if there’s a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other.”

Prosecutors claimed that the former CEO had also contacted other current and former FTX employees and that his message to “Witness-1” is “suggestive of an effort to influence” them.

Kaplan, in a seven-page decision (pdf) on Wednesday, wrote that the message “appears to have been an effort to have both the defendant and Witness-1 sing out of the same hymn book.”

“Subject to hearing counsel’s argument, the message in its entirety seems to be an invitation for Witness-1 to align his views and recollections with the defendant’s version of events and thus make their relationship ‘constructive,’” Kaplan said.

Lawyers for Bankman-Fried argued that their client needed to communicate with some former employees, including his therapist, and objected to the ban on contact and use of encrypted or ephemeral messaging platforms, CoinDesk reported.

“Requiring Mr. Bankman-Fried to include counsel in every communication with a former or current FTX employee would place an unnecessary strain on his resources and prejudice his ability to defend this case,” his attorney Mark Cohen told the court. “Many of these individuals are Mr. Bankman-Fried’s friends. Imposing a blanket restriction on his contact with them would remove an important source of personal support.”

However, Kaplan in his decision noted that while lawyers for Bankman-Fried “seek to have the Court interpret that message in a benign way, that does not appear, at least on a preliminary basis, to be a persuasive reading.”

New Hearing Date Set

Under the terms of the new bail conditions, Bankman-Fried will be allowed to contact immediate family members.

A spokesperson for Bankman-Fried declined to comment.

FTX, which was founded in 2019, filed for bankruptcy protection on Nov. 11 following a spectacular collapse after it emerged that Alameda had been using FTX customer assets to keep itself propped up.

Bankman-Fried was subsequently arrested on Dec. 17 in the Bahamas, where the company was headquartered, and he was extradited to the United States, where he was released on a $250 million bail and placed under house arrest at the California home of his parents.

In January, he pleaded not guilty to charges of fraud, conspiracy, campaign finance law violations, and money laundering.

According to Kaplan’s decision, the new amendments to Bankman-Fried’s bail conditions will stay in place until Feb. 7, when a hearing is scheduled.

That hearing will also consider a request by Bankman-Fried’s lawyers to allow him to access and transfer cryptocurrency.

Reuters contributed to this report.