Former cryptocurrency exchange FTX chief Sam Bankman-Fried has been issued a gag order by a judge following allegations made by prosecutors that he leaked his former business partner’s personal information to the press in an apparent effort to discredit her as a witness in his ongoing fraud trial.
According to reports from various news outlets, Bankman-Fried is accused of disclosing personal writings belonging to his former girlfriend and business partner, Caroline Ellison, to the New York Times. In light of these serious allegations and other incidents that have surfaced since his arrest on fraud charges in December, prosecutors requested U.S. District Court Judge Lewis Kaplan to detain Bankman-Fried until the trial.
Assistant US Attorney Danielle Sassoon stated that Bankman-Fried has been in communication with the media on multiple occasions as part of an “ongoing campaign with the press that has now crossed a line.” The prosecution urged the federal judge to consider incarceration for Bankman-Fried, claiming the latter’s actions amounted to witness tampering.
Sassoon firmly stated, “No set of release conditions can ensure the safety of the community,” reinforcing the severity of the situation.
In response to the hearing, Judge Kaplan issued a gag order, prohibiting Bankman-Fried, his legal team, and representatives from discussing the case publicly. He announced that he would allow additional filings from both the prosecutors and defense attorneys over the next week before deciding whether to revoke Bankman-Fried’s current bond conditions, allowing him to remain under house arrest until his criminal trial, which is scheduled for October.
Following his arrest in December, Bankman-Fried posted bail amounting to $250 million and has been under house arrest at his parents’ residence in California, diligently preparing for his upcoming trial. The arrest took place in the Bahamas based on the request of the U.S. authorities and he was later extradited back to California. He was permitted to use his laptop under certain restrictions to assist his legal team in preparing for the trial.
The hearing followed heated exchanges of letters between prosecutors and defense attorneys surrounding a New York Times article that referenced diary entries by Ellison, who was previously Bankman-Fried’s girlfriend and co-CEO of his hedge fund Alameda Research. Ellison is expected to testify against Bankman-Fried in the trial related to an alleged scheme to defraud investors into FTX, his cryptocurrency company. She had pleaded guilty to charges in the case.
The diary entries, written on Google Docs last year, reportedly revealed Ellison’s struggles and unease working with Bankman-Fried during their on-and-off relationship. According to the New York Times, the entries described her feeling self-conscious in his presence and her inclination to “shrink and become smaller and quieter and defer to others.” Lawyers representing Ellison declined to comment on the matter.
Prosecutors asserted that it was Bankman-Fried who leaked the diary entries to undermine Ellison’s credibility as a witness in the upcoming trial, prompting them to request a gag order against him.
During Wednesday’s hearing, prosecutors further argued that home confinement was insufficient to control Bankman-Fried’s behavior, contending that he had repeatedly violated restrictions. Allegedly, he used messaging apps with auto-deleting and encrypted texts and installed a VPN to access restricted content.
Bankman-Fried’s defense attorney, Mark Cohen, emphasized the staggering volume of discovery material in the case, with data on his client’s laptop filling the equivalent of three skyscrapers if printed out.
Prosecutors revealed that Bankman-Fried had gone beyond responding to press inquiries, having exchanged over 100 emails and conducted more than 1,000 calls with journalists. Specifically, he had 100 calls with the Times journalist who authored the article about Ellison’s diary and 500 calls with author Michael Lewis, known for an upcoming book about Bankman-Fried. Prosecutors expressed concern that this extensive communication could taint the jury with inadmissible information, affecting the fairness of the trial.
Judge Kaplan acknowledged the complexity of the situation, recognizing the defendant’s right to access documents for his defense and the First Amendment concerns, while also considering the prosecutors’ interest in protecting witnesses.
“I say to the defendant, Mr. Bankman-Fried, you better be taking it seriously, too,” he said.
In January, Bankman-Fried pleaded not guilty to eight federal charges, with the trial scheduled for October. His troubles began in November after CoinDesk reported suspicious financial dealings between FTX and the related Alameda Research hedge fund, leading to his subsequent resignation from FTX and the company’s filing for bankruptcy. During the arrest, several other high-ranking executives at both firms were also taken into custody.
In total, Bankman-Fried is facing 13 counts, including securities fraud, wire fraud, and campaign finance violations. Apart from the eight charges he initially pleaded not guilty to in January, he is also accused of overseeing the transfer of $40 million from an Alameda account to a private account believed to be associated with Chinese officials in November 2021.
In June, federal prosecutors in New York have made a surprising offer in the case. In an attempt to expedite proceedings, they propose dropping several criminal charges against Bankman-Fried for now, on the condition that they can be tried later.
Following a recent ruling in the Bahamas, where Bankman-Fried has been challenging additional charges, prosecutors have decided to sever five of the 13 charges. These charges include allegations of bank fraud and bribery of the Chinese government.
Information for this briefing was found via Business Insider, Forbes, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
