“FTX Founder Sam Bankman-Fried Arrested as Bail Revoked Amid Witness Tampering Allegations”

Abhi

1 year ago

“FTX Founder Sam Bankman-Fried Arrested:

Sam Bankman-Fried, the creator of the now-defunct cryptocurrency exchange FTX, was detained on Friday after a federal judge in New York revoked his bail. In a trial that was scheduled to start in less than two months, the judge charged Bankman-Fried with trying to influence witnesses who were going to testify against him.

Since his arrest in December on suspicion of fraud-related charges associated with the demise of FTX, Mr. Bankman-Fried, 31, has been under house arrest at his parents’ Palo Alto, California, home. Following allegations from the prosecution that Mr. Bankman-Fried had frequently attempted to obstruct the testimony of witnesses, including by releasing papers to reporters, Judge Lewis A. Kaplan of the Federal District Court in Manhattan declared that this agreement would have to be terminated at a hearing on Friday.

From the bench, Judge Kaplan pronounced, “I am going to revoke bail because he has repeatedly gone up to the line.”

Before two U.S. marshals started handcuffing Mr. Bankman-Fried, he was told to take off his tie and navy suit jacket. While her husband was present, Barbara Fried tried to approach him, but a court official warned her to keep her distance. He was delivered to the Metropolitan Detention Centre in Brooklyn.
Barbara Fried wears sunglasses, a dark sleeveless shirt, and dark leggings as she leaves the courthouse, surrounded by people.
After her son was taken into custody on Friday, Mr. Bankman-Fried’s mother, Barbara Fried, exited court.Credit…The New York Times Thomas Siegel

One of Mr. Bankman-Fried’s attorneys, Mark Cohen, announced in court that he intended to appeal. Judge Kaplan said that he would jail Mr. Bankman-Fried immediately after that attempt, regardless of the outcome.

Since the collapse of his cryptocurrency company in one of the most spectacular corporate meltdowns in recent memory, Mr. Bankman-Fried has suffered several humiliating setbacks, but the courtroom event was the most recent one. Before filing for bankruptcy last fall as a result of a run on deposits, FTX rode the highs of the virtual currency market to become one of the industry’s top companies. Mr. Bankman-Fried went from being a business tycoon courted by politicians and celebrities to a criminal suspect facing years in prison within the span of a few weeks.

What You Need to Know About the Demise of FTX Card 1 of 6

What is it, FTX? The now-defunct company was one of the biggest cryptocurrency exchanges in the world. It let users swap one digital currency for another or for fiat money, and it included a built-in cryptocurrency called FTT. The Bahamas-based corporation used risky trading techniques to expand its business. These techniques are illegal in the US.

Who is Sam Bankman-Fried, exactly? He is the thirty-year-old founder and former CEO of FTX. He was formerly considered the “golden boy” of the cryptocurrency industry, a large Democratic Party donor, and well-known for his commitment to effective altruism, a charitable movement that urges adherents to contribute their wealth in wise and useful ways.

What led to the onset of FTX’s issues? The CEO of Binance, the largest cryptocurrency exchange in the world, Changpeng Zhao, sold Bankman-Fried his stake in FTX last year in return for a number of FTT tokens. In November, Zhao revealed his plan to sell the tokens and sparked concerns about FTX’s stability.

“FTX Founder Sam Bankman-Fried Arrested as Bail Revoked Amid Witness Tampering Allegations”

What led to FTX’s decline? Investors were concerned, and FTT’s value plummeted after Zhao’s remarks. FTX suffered a $8 billion loss as a result of investors hastily leaving the company. On November 11, FTX was compelled to file for bankruptcy after Binance originally offered a loan to save the company but later withdrew its offer.

Why was Bankman-Fried held captive? The Justice Department and the SEC started looking into whether FTX had improperly used consumer funds to promote Alameda Research, a cryptocurrency trading platform that Bankman-Fried had helped to build, after FTX went out of business. In December, Bankman-Fried was arrested in the Bahamas on suspicion of defrauding investors and lying to them. He was eventually extradited to the US.

What charges is he dealing with? Following his extradition, a number of charges were added to and later eliminated from Bankman-Fried’s indictment. The prosecution has also dismissed the charge that he violated campaign finance laws. He will now face seven counts at his trial in October, including accusations that he misled FTX’s clients and lenders.

Now that his trial is set to begin on October 2, he must spend time in a jail cell preparing for it.

The legal dispute over Mr. Bankman-Fried’s bail was sparked by a New York Times article that revealed Caroline Ellison’s personal writings while she was an executive in his corporate empire and had dated him. Ms. Ellison agreed to help the law enforcement officers looking for Mr. Bankman-Fried and admitted guilt to crimes involving fraud.

In court filings, the prosecution alleged that Mr. Bankman-Fried sent the materials to The Times with the intention of intimidating Ms. Ellison by denigrating her before his trial. They also referred to Mr. Bankman-Fried’s lengthy dealings with other media personalities, like novelist Michael Lewis, whose book about FTX is set to be released the same week the trial begins.

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As the bail issue was debated in court files over the previous two weeks, Judge Kaplan ordered a temporary gag order preventing the founder of FTX and his representatives from speaking to the media.

According to Mr. Bankman-Fried’s counsel, by giving the files to The Times, he was just expressing his right to speak up in response to “a question from the media” and had not violated the conditions of his bail agreement. The Times, the Reporters Committee for Freedom of the Press, and a documentary filmmaker who was creating a video about Mr. Bankman-Fried were among the parties who each submitted a court brief arguing that the gag order violated the First Amendment.

It was unclear how the order was proceeding after Mr. Bankman-Fried was put into custody on Friday. In contrast, Judge Kaplan argued in court that “defendant speech is not protected if it is to bring about a crime.”

Through his interactions with the media and another attempt to contact a former FTX employee, he claimed to have come to the conclusion that Mr. Bankman-Fried was attempting to “intimidate or also influence” the witnesses in the case.

A representative for Mr. Bankman-Fried declined to comment. The Southern District of New York U.S. Attorney’s Office, which is prosecuting Mr. Bankman, did not respond to a request for comments.

Following the demise of the company during a hectic week in November, Mr. Bankman-Fried was jailed in the Bahamas, where FTX had its headquarters. He was charged with misusing customer funds to pay for expensive real estate acquisitions, political donations, and charitable efforts. He was detained for a few days in the Bahamas before being extradited to the nation and granted exceptionally tight bail conditions, including confinement to his parents’ house and the wearing of an ankle monitor. He entered a plea of innocence.

For conduct that the prosecution argued went above what he was allowed to do while awaiting trial, Mr. Bankman-Fried has received multiple cautions since his release.

In court records from January, the prosecution presented evidence that he had written to a former FTX official who might be a witness in the case to request a meeting. Furthermore, they said that Mr. Bankman-Fried had used a virtual private network, or VPN, a method that may be used to conceal a person’s online behaviour while they are awaiting trial.

At the time, Judge Kaplan issued a more stringent bail order, ordering Mr. Bankman-Fried to follow limitations on the websites he could visit and prohibiting him from getting in touch with former FTX employees. Visitors were not permitted to carry phones or computers into his parents’ house.

Effects of FTX’s Demise

Sam Bankman-Fried, the creator of the now-defunct cryptocurrency exchange FTX, had his bail revoked and was now in jail, in a remarkable turn of events that occurred less than two month before the case was set to go to trial.
Charges Withdrew: Federal prosecutors investigating the demise of FTX said that they were dropping their allegation that Bankman-Fried had violated the laws governing campaign financing. The withdrawal follows the prosecution’s decision to proceed with the trial without filing five further charges in June.
An ex-Hollywood agent who introduced Bankman-Fried to notable figures and celebrities like Katy Perry, Orlando Bloom, and Bill Clinton is the subject of a recent lawsuit. She goes by the moniker “The Celebrity Super Connector.”
Jane Street Capital, a little-known Wall Street company where Bankman-Fried started his career, has come to light as a result of FTX’s demise. His interest in “effective altruism” drew him there.
Even though bail cancellation is not typical, especially so close to a trial, it does happen occasionally when courts are worried that the defendant’s actions will endanger the public or the credibility of witnesses.

Erik Gordon, a professor of law and business at the University of Michigan, said judges have a “good bit of discretion” when it comes to revocation of bail. If you are out on bail, you should refrain from taking any action that can be seen as an attempt to pressure a witness.

The Times article on Ms. Ellison outlined her concerns about her role as CEO of the hedge fund Mr. Bankman-Fried founded, Alameda Research, as well as her observations on their relationship, which were taken from private Google papers addressed to Mr. Bankman-Fried. The prosecution argued that the sensitive nature of the texts showed Mr. Bankman-Fried wanted to terrify and disparage his ex-girlfriend.

At a hearing last month, one of the prosecutors, Danielle Sassoon, said that “no set of release conditions can insure the safety of the community.”The defendant has now shown that he is committed to abusing the conditions of his freedom and influencing this trial.

For Judge Kaplan, the article about Ms. Ellison was the turning point. In an apparent attempt to persuade him to “sing from the same hymnbook,” Mr. Bankman-Fried sent communications to the former FTX executive, who served as the company’s senior counsel for the United States division, Judge Kaplan ruled on Friday. He further claimed that Mr. Bankman-Fried sent The Times papers with the intention of “portraying Ms. Ellison in a negative light.”

As they sought to uphold the bail arrangement, Mr. Bankman-Fried’s solicitors contended that the conditions in the jail would make it difficult for him to be prepared for the trial.

Judge Kaplan suggested that Mr. Bankman-Fried transfer to a location with more dependable internet service, such as a jail in Putnam County, New York. He stated that he was willing to take into account a strategy that would let Mr. Bankman-Fried consult with his solicitors while being under close supervision at their office.

But Mr. Bankman-Fried will first live at the Brooklyn Federal Building. His defenders asserted in court papers that there was a “staffing crisis” at the prison and that convicts often had limited access to computers.

The location is “not on anyone’s list of five-star facilities,” according to Judge Kaplan on Friday.

Reporting support was supplied by Santul Nerkar.