Yahoo Finance Prosecutors raise concerns over FTX's Sam Bankman-Fried's hidden internet access
U.S. attorneys raised new concerns about Sam Bankman-Fried's electronic communication capabilities in new court documents filed late Monday and, along with the former FTX CEO's lawyers, asked a federal judge for more time to negotiate tightened bail conditions.
"Today, it came to the government’s attention...that the defendant used a VPN or “Virtual Private Network” to access the internet on January 29, 2023, and February 12, 2023," prosecutors wrote in a letter to U.S. District Court Judge Lewis Kaplan. Judge Kaplan is overseeing the government's case accusing Bankman-Fried of multiple felonies tied to FTX, including fraud, conspiracy, and money laundering.
A VPN hides a user’s IP address, the government lawyers wrote. While common, VPNs are problematic in Bankman-Fried's case, they said, because they conceal the websites he visits, disguise his whereabouts, allow access to web content otherwise inaccessible in the U.S., and allow for undetectable data transfers and access to the dark web.
"In other words, the internet service provider or third parties (like the government) cannot see which websites a user is visiting or what data is being sent and received online," prosecutors wrote.
Lawyers for Bankman-Fried maintain the defendant did not use a VPN for any improper purpose.
"[O]ur client used the VPN to access an NFL Game Pass international subscription that he had previously purchased when he resided in the Bahamas, so that he could watch NFL playoff games," his lawyers wrote in a separate letter to Judge Kaplan.
Lawyers for the two sides have been working for several weeks to find common ground that limits Bankman-Fried’s use of messaging apps and his contact with potential witnesses who may testify at his anticipated fraud trial.
The parties are requesting until February 17 to discuss the implications of the defendant’s use of a VPN.
The proposal comes after Judge Kaplan held a hearing to discuss prosecutors’ concerns that Bankman-Fried messaged the FTX US general counsel using email and the encrypted messaging app, Signal. The general counsel, Ryne Miller, who was not named in the government’s request to alter bail terms, may testify as witness at trial.
“I would really love to reconnect and see if there’s a way for us to have a constructive relationship, use each other as resources when possible, or at least vet things with each other,” Bankman-Fried wrote in January 15 messages to Miller, prosecutors say. The government lawyers also said that the defendant contacted other current and former FTX employees.
Bankman-Fried is facing multiple fraud and conspiracy charges as well as accusations of money laundering and campaign finance violations tied to his role as CEO of FTX, an international crypto trading and investment empire now embroiled in bankruptcy proceedings in the U.S. and the Bahamas.
Prosecutors say Bankman-Fried lied about FTX’s use of customer funds by secretly allowing the assets to be transferred to his associated crypto hedge fund Alameda Research. Investors in FTX’s various entities were duped by the same scheme, prosecutors claim.
Justice Department lawyers on Friday told Judge Kaplan that they had reached an agreement with the defense to permit Bankman-Fried’s use of messaging apps, so long as he allows software that saves and archives messages to be added to his iPhone. The agreement, they said, was further contingent on Bankman-Fried’s agreement to refrain from contacting specific individuals, though the names of those individuals were not disclosed.
Current bail conditions for Bankman-Fried remain in place until Judge Kaplan issues a ruling on the matter. During Friday’s hearing, Judge Kaplan extended those conditions until February 21.
Convictions on all eight of Bankman-Fried’s charges together carry up to 115 years in prison. He pleaded "not guilty" at his initial arraignment. A trial date is set for October 2.
Separately, the U.S. Securities and Exchange Commission and the Commodities Futures Trading Commission filed civil suits against the former crypto mogul, FTX.com, and Alameda Research. U.S. attorneys have asked for the matters to be paused until criminal accusations against Bankman-Fried are resolved.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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