(Bloomberg) — FTX co-founder Sam Bankman-Fried is in custody after a federal judge said that the embattled crypto mogul likely tried to tamper with two witnesses while on bail.
US District Judge Lewis A. Kaplan revoked the 31-year-old’s bail following a hearing in Manhattan on Friday. Bankman-Fried took off his jacket, tie and shoelaces, and was immediately placed in handcuffs as marshals escorted him out of the courtroom. His mother cried in the public gallery and was comforted by Bankman-Fried’s father.
Kaplan said Bankman-Fried had likely intended to influence two witnesses — former Alameda Research Chief Executive Officer Caroline Ellison and the former FTX general counsel — and to have them “back off” and “hedge their cooperation” with the government.
“A defendant’s speech is not protected to the extent that it is intended to bring about a crime,” Kaplan said.
The former FTX chief executive officer’s lawyers immediately filed a notice of appeal over the bail decision, but lost an application to stay Kaplan’s order.
Metropolitan Detention Center
That meant Bankman-Fried would remain in jail while his legal team fought to overturn the revocation in the 2nd US Circuit Court of Appeals. He will be taken to the Metropolitan Detention Center in Brooklyn from the courthouse, according to a person familiar with the process.
The MDC is the main federal prison in New York for defendants awaiting trial, previously including the likes of British socialite Ghislaine Maxwell. It is unclear how long Bankman-Fried will stay at the MDC with prosecutors suggesting he could potentially be moved to the Putnam County Correctional Facility in upstate New York.
Prosecutors had asked the judge to revoke Bankman-Fried’s $250 million bail package after accusing him of leaking documents in an attempt to discredit Ellison, who will likely be a key government witness. Prosecutors had previously raised issues with Bankman-Fried’s behavior in January, after he messaged the former FTX general counsel on an encrypted app, suggesting they “vet things with each other.”
Bankman-Fried’s message to the former general counsel was an attempt to have both men “sing out of the same hymn book” and “an attempt at witness tampering,” Kaplan said.
After signing off on an interim gag order last month, the judge found a permanent gag order wasn’t “a workable solution longer term particularly with someone who has shown a willingness and a desire to risk crossing the line in an effort to get right up to it no matter where the line is.”
Read more: Ex-FTX Executive Salame Talking to Prosecutors About Plea Deal
The latest fight over Bankman-Fried’s bail was sparked by a New York Times story last month. The article quoted excerpts of diary notes made by Ellison on Google Docs. Ellison and Bankman-Fried had previously been in a relationship.
The notes were “extremely personal and intimate,” Kaplan said, and not something anyone in a relationship would want shared with anybody, let alone with the New York Times. Prosecutors allege Bankman-Fried accessed the documents through his own Google Drive and then showed them to the Times reporter.
In arguing against detaining his client, lawyer Mark Cohen had pointed to the need for Bankman-Fried to adequately prepare for his upcoming trial — a task that would be difficult from inside the MDC.
Prosecutor Danielle Sassoon said the government had spoken to the Putnam County Correctional Facility, about two hours north of New York City, where Bankman-Fried could use a laptop for internet access and to review legal materials.
When Cohen argued that Bankman-Fried didn’t intend to tamper with witnesses, Kaplan asked about a scenario where “two guys walk into a store and say to somebody this is an awful nice store and it would be a shame if it burned to the ground.”
Bankman-Fried has been under house arrest at his parent’s home in Palo Alto, California, since last December, after he was arrested in the Bahamas. He is accused of orchestrating a multibillion dollar, yearslong fraud at FTX and Alameda Research, both of which collapsed last November. He has pleaded not guilty to all the charges against him.
While his time behind bars has been minimal, Bankman-Fried did spend several days inside the notorious Fox Hill jail in the Bahamas before consenting to extradition to the United States. He spent one night in custody in the US before he was released on bail.
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