U.S. says FTX founder Bankman-Fried needs limits on communications, asset access

By Jonathan Stempel

NEW YORK, Jan 30 (Reuters) – The U.S. government on
Monday urged a judge to reject Sam Bankman-Fried’s claim it went
too far by insisting that the indicted founder of the
now-bankrupt FTX cryptocurrency exchange be banned from
contacting his former colleagues.

In a letter to U.S. District Judge Lewis Kaplan in
Manhattan, prosecutors also asked that a bail condition that
prevents Bankman-Fried from accessing or transferring assets at
FTX and his Alameda Research hedge fund be left in place.

They argued those assets were “vulnerable to exploitation
and in need of protection from the defendant.”

The requests came two days after Bankman-Fried’s lawyers
proposed letting their client access crypto assets and continue
communicating with most of FTX’s and Alameda’s estimated 350
employees, some of whom they said could help his defense.

Mark Cohen and Christian Everdell, who represent
Bankman-Fried, did not immediately respond to requests for
comment. They have until Feb. 1 to address prosecutors’ view on
accessing assets.

Bankman-Fried, 30, has been free on $250 million bond and
confined at his parents’ home in California, after pleading not
guilty to fraud for allegedly looting billions of customer
dollars from FTX.

Prosecutors previously raised concerns about witness
tampering after Bankman-Fried on Jan. 15 sent an encrypted
message over the Signal app to an FTX affiliate’s general
counsel, who could testify against him at a trial set to begin
in October.

“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 had written.

In Monday’s letter, prosecutors called the message an effort
to “improperly influence” the general counsel, no matter how
benign it might seem.

“The defendant’s position of authority with respect to his
former employees, combined with his recent outreach to a former
employee about the case, raises a sufficient specter of witness
tampering,” prosecutors said.

Prosecutors also want to ban Bankman-Fried from using apps
such as Signal that let users auto-delete messages, and instead
have him communicate in text messages, emails and phone calls.

Bankman-Fried’s lawyers have said their client was trying
simply to provide assistance to the general counsel, and has not
been not using the auto-delete feature.

They also proposed that Bankman-Fried not be allowed to talk
with select colleagues, including former Alameda chief Caroline
Ellison, former FTX technology chief Zixiao “Gary” Wang and
former FTX engineering chief Nishad Singh.

Ellison and Wang have pleaded guilty and are cooperating
with prosecutors.
(Reporting by Jonathan Stempel in New York; Editing by Anna
Driver)