A federal judge extended restrictions on Sam Bankman-Fried’s ability to contact former employees of FTX, citing concerns that he could delete text messages and obstruct the government’s investigation.
Judge Lewis Kaplan said in a bail hearing Thursday that he was concerned about the delete functions in certain messaging apps, and that he needed more information from Bankman-Fried’s attorneys about how they intend to preserve their client’s communications while he awaits trial on federal fraud and conspiracy charges.
Bankman-Fried pleaded not guilty in January. He is under house arrest on a $250 million bond, residing in his parents’ Palo Alto, California, home, while he awaits trial.
Thursday’s hearing came after prosecutors raised concerns about potential witness tampering, citing a text message Bankman-Fried sent to the former general counsel of FTX, the bankrupt crypto exchange.
The judge said last week that the text message appeared to be a “material threat of inappropriate contact with prospective witnesses.”
Both sides were in court Thursday after Bankman-Fried’s lawyers said they reached an agreement with prosecutors to restrict the use of encrypted messages. Under its terms, Bankman-Fried would not be permitted to use encrypted messaging apps, such as Signal, that the government can’t easily obtain information from. But he would be allowed to use FaceTime and Zoom to place audio and video calls, and text using iPhone messages, email and Facebook messenger, and his messages would be archived.
The judge was skeptical of the government’s confidence that it would be able to retrieve messages sent on those other apps and wanted more information about how messages could be retrieved if they were deleted.
He also asked why prosecutors weren’t concerned about other means of communication, citing recent news articles that 57 letters written by Mary Queen of Scots dating to the 1500s were recently deciphered.
“Are we being a little short-sighted by focusing only on apps?,” he asked.
Bankman-Fried’s attorneys said they have identified a company that makes a compliance application that automatically archives messages. But the judge asked the attorneys for more information, and said the restrictions on Bankman-Fried’s communications would continue until a follow-up hearing on February 21.
In the text message to his former colleague, identified as “Witness-1” in court, Bankman-Fried wrote: “I know it’s been a while since we’ve talked. And I know things have ended up on the wrong foot. 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. I’d love to get on a phone call sometime soon and chat.”
While Bankman-Fried’s lawyers in said that the message was benign, Judge Kaplan disagreed in last week’s hearing, saying it appears the message was “to have both the defendant and Witness-1 sing out of the same hymn book.”
FTX, the cryptocurrency exchange co-founded by Bankman-Fried in 2019, collapsed into bankruptcy in November amid a liquidity crisis fueled by allegations about improper financial ties with Alameda, Bankman-Fried’s ostensibly separate hedge fund.
Federal prosecutors now allege that the firm, under the direction of Bankman-Fried, stole customer deposits to fund unrelated activities, such as political donations, luxury real estate purchases and covering losses at Alameda, Bankman-Fried’s hedge fund. At least two former executives have pleaded guilty to fraud and conspiracy charges in the case and are cooperating with investigators.
Bankman-Fried, 30 years old, has maintained he never knowingly commingled FTX customer funds to funnel them into Alameda, which placed large, highly risky bets in crypto markets. He could face 115 years in prison if convicted on all charges.
—CNN’s Allison Morrow contributed to this report.