Sam Bankman-Fried Skating on Thin Ice as Judge Threatens Jail

Federal Judge Lewis Kaplan on Thursday (Feb. 16) threatened to revoke ousted FTX founder Sam Bankman-Fried’s bail.

That’s if the former crypto wunderkind doesn’t agree to stricter restrictions placed on his use of electronic devices, apps, and access to the internet, per a Bloomberg report.

Bankman-Fried’s lawyer called Kaplan’s proposal “draconian” during the court hearing, while acknowledging there is “no margin for error” for his client, who is “on trial for his life.”

The judge for his part said that while the hearing wasn’t over bail revocation, “it could get there eventually.”

As reported by PYMNTS Wednesday (Feb. 15), Bankman-Fried and his attorneys have been sparring with government prosecutors over the terms of the 30-year-old’s $250 million bail release.

Federal prosecutors have previously presented evidence that the one-time crypto executive used Signal, an encrypted messaging platform, to contact the general counsel of FTX US.

Mark Cohen, an attorney representing Bankman-Fried, said at the time that his client’s use of Signal to contact FTX US’ general counsel — a witness in the case — was “merely an innocuous attempt to offer assistance in FTX’s bankruptcy process and does not reflect misconduct that warrants the restriction the Government proposes here.”

All seemed well, at least until Bankman-Fried’s improper use, on two occasions, of a virtual private network (VPN) to access the internet reignited the back-and-forth arguments over the conditions of his house arrest.

Judge Kaplan noted that Bankman-Fried used a VPN to access the internet without being tracked at least once after he was ordered to refrain from using encrypted services, representing a breach of the restrictions.

Bankman-Fried’s lawyer claimed his client was just trying to watch the NFL playoffs and Super Bowl and only used the VPN to access the Bahamian site his account is tied to.

Kaplan wasn’t having it.

“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 U.S.,” Kaplan suggested, as relayed by the Bloomberg report.

VPNs hide users’ IP addresses and encrypt their data, and Kaplan also requested the defense hire a consultant to advise him on how to handle the more technical issues surrounding what Bankman-Fried might be able to do when anonymously accessing the internet.

The latest drama in the Bankman-Fried fraud case comes just one day after it was revealed that two Stanford faculty members, former law school dean Larry Kramer and computer scientist Andreas Paepcke, were the mysterious guarantors responsible for co-signing Bankman-Fried’s bail bond, ending weeks of swirling speculation.

The judge gave both parties until the end of next week (Feb. 24) to submit any bail package modification proposals.