The federal judge overseeing Sam Bankman-Fried’s fraud trial threatened to revoke the FTX co-founder’s US$250 million bail package if severe restrictions weren’t placed on his use of electronic devices and apps.

US District Judge Lewis Kaplan made clear at a Thursday hearing that he didn’t think a government proposal that would limit Bankman-Fried to one monitored cell phone and laptop and restrict his use of Zoom to communicating with counsel was sufficient.

The hearing follows weeks of concern over Bankman-Fried’s use of encrypted messaging app Signal to contact FTX’s US general counsel, a potential witness in the case, and his use of virtual private networks. Both technologies could potentially allow him to shield his communications from the government.

Bankman-Fried’s lawyer, Mark Cohen, who has argued his client’s use of apps and VPNs was innocent called the government proposal “draconian” on Thursday, prompting a fiery response from the judge.
 
“It isn’t the government who contacted the witness,” Kaplan admonished Cohen. The judge added that, though the hearing wasn’t over bail revocation, “it could get there eventually.”

Kaplan also expressed skepticism about Bankman-Fried’s claim that he used a VPN to watch football, including the Super Bowl, while out on bail at his parents’ house in Palo Alto, California.

“So what he was doing was sitting in California in the United States using the VPN to create the impression that he was going to use this international subscription from outside the US,” the judge suggested. Cohen responded that he had wished he had bought his client a television from Best Buy because “there isn’t a television in the house.”

Cohen said Bankman-Fried understood what was at stake and that he was “on trial for his life.”
‘No Margin for Error’

“There is no margin for error,” the defense lawyer said. “If there is any violation of whatever order the court fashions, we’ll deal with an entirely different proceeding.”

Kaplan gave the parties until the end of next week to submit proposals for how to modify the bail package, suggesting that the defense hire a consultant who can advise the judge on how to handle the technological issues involved.

Thursday’s hearing wasn’t the first time Kaplan had expressed concern about Bankman-Fried possibly using surreptitious methods to communicate with witnesses and other parties. At a Feb. 9 hearing, the judge rejected a deal prosecutors had reached with the defense that would have barred Bankman-Fried from using Signal but still let him use WhatsApp with monitoring technology and make FaceTime and Zoom calls.
No More ‘Whack-a-Mole’

In detailing much tougher restrictions on Thursday, federal prosecutor Nicolas Roos said the government had taken Kaplan’s concerns into account and wouldn’t “keep engaging in some whack-a-mole approach” whereby Bankman-Fried moved from using one app to another.

But the judge was unconvinced. “You’re putting an awful lot of trust in him, aren’t you?” Kaplan asked, noting that the proposal still let Bankman-Fried use electronic devices.

Later, in admonishing Cohen, the judge noted that Bankman-Fried was accused of telling FTX colleagues to use encrypted apps to conceal their communications.   

“I think the onus is on you to establish to my satisfaction that whatever conditions I might contemplate might in fact be effective in protecting the public from witness-tampering and whatever else is at risk by virtue of giving him all this access,” Kaplan.

The case is US v. Bankman-Fried, 22-cr-673, US District Court, Southern District of New York (Manhattan).

  - Bloomberg