Judge leaves in place bail conditions for FTX founder Sam Bankman-Fried

NEW YORK — (TNS) A New York City judge on Thursday extended his restrictive bail conditions for disgraced FTX founder Sam Bankman-Fried.

At a Manhattan federal court hearing, which Bankman-Fried traveled from California to attend, Judge Lewis Kaplan left in place bail conditions, despite the feds’ agreeing with Bankman-Fried’s lawyers to let him use specific messaging applications while waiting for trial.

The judge was skeptical that Bankman-Fried — the onetime golden boy of the crypto world — couldn’t find another way to encrypt communications without access to apps like Signal.

“I read last night that there have recently been discovered 57 letters written by Mary, Queen of Scots in the 16th century that were encrypted without the use of any app and before the invention of computers, and they finally cracked the encryption. We are being a little shortsighted in focusing only on the apps,” Kaplan said.

Prosecutors asked Kaplan last month to severely curtail Bankman-Fried’s access to encrypted messaging apps and bar him from contacting his former employees after learning he got in touch with potential witness, FTX’s general counsel Ryne Miller, whose name was redacted in court documents.

Cooperating witnesses have told the feds that Bankman-Fried directed his companies to auto-delete messages to eliminate paper trails, court documents say. Prosecutors agreed to an arrangement that would allow Bankman-Fried to use certain apps — like Zoom, WhatsApp and FaceTime — but the judge on Tuesday turned that down and ordered them to appear in court.

“You don’t think this defendant is bright enough to encrypt something without a computer?” Kaplan asked at Thursday’s hearing.

Bankman-Fried’s lawyer, Christian Everdell — who prosecuted notorious Mexican drug baron Joaquin “El Chapo” Guzman in 2018 and represented Jeffrey Epstein accomplice Ghislaine Maxwell in 2021 — said his client would agree not to delete any messages if permitted WhatsApp access.

“Your honor, Mr. Bankman-Fried is not going to use any of the deletion features. He is not going to auto-delete, or anything like that,” Everdell said.

But Kaplan said he was “far less interested” in what was convenient for Bankman-Fried than he was in witness tampering.

“The fact that you have negotiated something that makes the government sort of comfortable and makes you and your client comfortable, I’m not sure is going to make me comfortable,” Kaplan said.

“There is still snail mail and there is still email and there are all kinds of ways to communicate that don’t present the same risks.”

Kaplan left the restrictions in place for the time being to “chew on it a little bit” and ordered the parties to submit arguments by Feb. 21.

Bankman-Fried, 30, has pleaded not guilty to criminal wire fraud and conspiracy charges alleging he siphoned billions from investors that flowed through his crypto-trading platform to pay off his cryptocurrency hedge fund Alameda’s loans. The feds say he further invested millions in concealed donations to political candidates ahead of the 2022 midterm elections.

Arrested in the Bahamas in December and extradited to the U.S., his $250 million bond package — which allows him to wait for trial at his Stanford law professor parents’ home in Palo Alto, California — is the largest in history. He’s appealed a decision to unseal the name of two of the four signers of the mammoth package. The others are his parents, Barbara Fried and Joseph Bankman.

Bankman-Fried’s downfall came after Alameda’s leaked balance sheets revealed an $8 billion hole in its accounts. The feds say at least 1 million people potentially fell victim.

(By Molly Crane-Newman, New York Daily News)