FTX’s Bankman-Fried headed for jail over alleged witness tampering

NEW YORK, Aug 11 (Reuters) – Sam Bankman-Fried is heading to jail after a U.S judge on Friday revoked his bail, finding probable cause that the indicted founder of the bankrupt FTX cryptocurrency exchange tampered with witnesses at least twice.

U.S. District Judge Lewis Kaplan’s decision to jail the 31-year-old former billionaire ahead of his Oct. 2 fraud trial over FTX’s November 2022 collapse came after prosecutors said he had “crossed a line” by sharing private writings by former romantic partner Caroline Ellison with a New York Times reporter.

“He has already – without violating any other bail condition save that he not commit another crime – gone up to the line over and over again,” Kaplan, who is known for his no-nonsense demeanor in the courtroom, said in a hearing in Manhattan federal court.

The judge rejected a defense request to delay Bankman-Fried’s detention pending appeal of the decision.

The decision could complicate Bankman-Fried’s efforts to prepare for trial. He faces charges of having stolen billions of dollars in FTX customer funds to plug losses at his Alameda Research hedge fund, where Ellison was chief executive officer.

She has pleaded guilty and is expected to testify against him at his Oct. 2 trial.

Bankman-Fried, who has pleaded not guilty, sat with his shoulders hunched, leaning forward on the table and fidgeting with a Post-It note as the judge order him detained.

He had a blank expression as he was led out of the courtroom in handcuffs by members of the U.S. Marshals Service after removing his shoelaces, watch, jacket and tie and emptying his pockets.

Bankman-Fried’s parents, both law professors at Stanford University, were present in the courtroom’s audience. His mother, Barbara Fried, nodded to him in tears as he left. His father, Joseph Bankman, placed his hand over his heart as he watched his son be led away.

Bankman-Fried rode a boom in the value of bitcoin and other digital assets to build a net worth of an estimated $26 billion and become an influential political donor in the United States, but FTX’s collapse wiped out his fortune. He later said he had $100,000 in his bank account.

JUDGE SAYS BANKMAN-FRIED ‘COVERED HIS TRACKS’

Bankman-Fried has been largely confined to his parents’ Palo Alto, California, home on $250 million bond since his December 2022 arrest.

Prosecutors argued that Bankman-Fried shared the writings to harass Ellison and to dissuade others from testifying by creating the perception that he could share unflattering information about them with the press.

His lawyer Mark Cohen argued Bankman-Fried wanted to defend his reputation and that he had a right under the U.S. Constitution’s First Amendment to speak to the press.

“The defendant fairly believed he could make those comments,” Cohen said.

Kaplan was not convinced, noting that Bankman-Fried had previously sought to tamper with a witness by asking the general counsel of an FTX U.S. affiliate to “vet things with each other.”

Kaplan said Bankman-Fried’s decision to show Ellison’s writings to the Times reporter during an in-person meeting, rather than in an electronic message that could have been monitored by prosecutors, suggested malign intent.

“It was a way, in his view, of doing this in a manner in which he was least likely to be caught. He was covering his tracks,” Kaplan said.

A July 20 article in the New York Times contained excerpts from Ellison’s personal Google documents prior to FTX’s collapse.

She described being “unhappy and overwhelmed” with her job and feeling “hurt/rejected” from her personal break-up with Bankman-Fried.

It was not immediately clear where Bankman-Fried would be held. Many defendants awaiting trial in New York City are held at Brooklyn’s Metropolitan Detention Center, which has been plagued by persistent staffing shortages, power outages and reports of maggots appearing in inmates’ food.

Danielle Sassoon, a prosecutor with the U.S. Attorney’s office in Manhattan, proposed at the hearing that Bankman-Fried instead be held at the Putnam County Correctional Facility, a medium-security jail about 55 miles (88 km) north of Manhattan which holds about 68 inmates.

Sassoon said the defendant would be able to access an internet-enabled laptop there to review evidence to prepare for trial.

Reporting by Luc Cohen in New York; Editing by Jonathan Oatis, Noeleen Walder and Rosalba O’Brien

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