FTX Judge Bans Bankman-Fried From Accessing Internet Over Private Networks

A federal judge on Tuesday ordered former FTX CEO Sam Bankman-Fried to immediately stop accessing the internet through virtual private networks, or VPNs.

US District Court Judge Lewis Kaplan, who is presiding over an eight-count fraud trial against Bankman-Fried for his alleged role in misusing FTX client and investor funds, ordered the 30-year-old to be cleared of the VPN refrains from using it until the matter is resolved. It will be discussed further at a hearing scheduled for Thursday.

“It is undisputed by the parties that the defendant used a VPN or ‘virtual private network’ to access the internet on at least two occasions during his release and at least once since the court ordered the defendant not to use encrypted or cursory phone calls or messages,” Judge Kaplan wrote in his order.

Bankman-Fried’s VPN use, the judge said, poses “many of the same risks associated with his use of encrypted messaging and self-deleting messaging applications,” prosecutors said in previous motions to the court to uphold the defendant’s bail terms exacerbate when concerns have been raised.

Former FTX CEO Sam Bankman-Fried, charged with fraud in the collapse of the bankrupt cryptocurrency exchange, exits federal court in New York City, U.S. February 9, 2023. REUTERS/Mike Segar

During a Feb. 10 hearing, attorneys for both sides told Judge Kaplan that they had reached a preliminary agreement to restrict Bankman-Fried’s use of messaging apps and his contact with potential witnesses who could testify at his awaited fraud trial.

In a letter to the court filed days later, prosecutors raised additional concerns about Bankman-Fried’s VPN use and, along with Bankman-Fried’s attorneys, asked for more time to negotiate tougher bail terms.

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“Today the government became aware … that on January 29, 2023 and February 12, 2023, the defendant used a VPN or ‘virtual private network’ to access the Internet,” prosecutors wrote in a February 13 letter to the US Judge Kaplan.

Justice Department attorneys said during Friday’s hearing that they would consent to the defendant’s use of certain messaging apps so long as archiving and compliance software is installed on his iPhone. The agreement, they said, was further conditional on Bankman-Fried not contacting certain individuals whose names would not be released in court.

The story goes on

Former FTX CEO Sam Bankman-Fried, charged with fraud in the collapse of the bankrupt cryptocurrency exchange, sits next to attorneys Christian Everdell and Mark Cohen during his court hearing in federal court in New York City, United States, February 9, 2023. REUTERS/Jane Rosenberg

Prosecutors said in court documents that initial concerns about Bankman-Fried’s communications arose when the former FTX chief notified FTX US’ general counsel via email as well as encrypted messaging app Signal. The contact, prosecutors said, created a risk of witness tampering because the general counsel could testify at Bankman-Fried’s trial.

“I’d really like to get back in touch and see if there’s a way for us to have a constructive relationship, use each other as resources if possible, or at least check things out with each other,” Bankman-Fried wrote in Messages from Jan. 15 to the FTX US General Counsel, prosecutors say. Government lawyers also said the defendant contacted other current and former FTX employees.

Bankman-Fried faces multiple allegations of fraud, conspiracy, money laundering and campaign finance violations related to his role as CEO of FTX, an international crypto trading and investment empire now in bankruptcy proceedings in the US and on involved in the Bahamas .

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Prosecutors say FTX and Bankman-Fried misappropriated client funds by secretly allowing the assets to be transferred to company-affiliated hedge fund Alameda Research. Investors in FTX and its affiliates, they claim, have been duped by the same scheme.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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