Bankman-Fried barred from contacting FTX employees, using Signal

FILE PHOTO: Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, departs from his court hearing at a federal court in New York City's Manhattan, U.S. January 3, 2023. REUTERS/David Dee Delgado

NEW YORK (Reuters) -A U.S. judge on Wednesday temporarily barred FTX founder Sam Bankman-Fried from contacting current or former employees of the cryptocurrency exchange or his Alameda Research hedge fund, and from using encrypted messaging tools including Signal.

The ruling by U.S. District Judge Lewis Kaplan came after federal prosecutors in Manhattan said Bankman-Fried might tamper with witnesses or destroy evidence in his criminal fraud case. He was arrested in December on charges of looting billions of FTX customer funds, and lying to investors and lenders.

Prosecutors last week cited a Signal message Bankman-Fried sent on Jan. 15 to the general counsel of the FTX U.S. affiliate, referred to in court papers as "Witness-1." Bankman-Fried proposed the two speak on the phone to try to "have a constructive relationship" or "vet things with each other."

Bankman-Fried, 30, has been under house arrest at his parents' California home after pleading not guilty. His lawyers said last week that his efforts to contact the general counsel the company's current chief executive, John Ray, were attempts to offer "assistance" and not to interfere.

Kaplan appeared skeptical of that argument, writing that Bankman-Fried's Jan. 15 message "appears to have been an effort to have both the defendant and Witness-1 sing out of the same hymn book."

"While defendant's counsel seeks to have the Court interpret that message in a benign way, that does not appear, at least on a preliminary basis, to be a persuasive reading," Kaplan wrote.

A spokesperson for Bankman-Fried declined to comment.

Kaplan wrote that the new restrictions on Bankman-Fried's conduct would be in place until at least Feb. 7, when he would hold a hearing to consider both sides' arguments. The order does not apply to Bankman-Fried's immediate family members, and he may communicate with FTX or Alameda employees if lawyers are present.

At next week's hearing, Kaplan will also consider a request by Bankman-Fried's lawyers to allow him to access and transfer cryptocurrency.

(Reporting by Luc Cohen in New York; Editing by Daniel Wallis)

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