NEW YORK—FTX founder Sam Bankman-Fried was ordered to return to a New York courtroom this week after the federal judge assigned to his fraud case said he’s communicating with others in ways the government can’t monitor. His lawyers, however, say he was merely accessing postseason NFL football games.
Judge Lewis A. Kaplan on Tuesday scheduled a hearing for Thursday to review Bankman-Fried’s bail conditions for the second week in a row. The judge also immediately altered the bail package to ensure Bankman-Fried no longer accesses the internet in ways that can’t be traced.
Bankman-Fried is accused of cheating investors and looting customer deposits on FTX, his cryptocurrency trading platform. It’s allegedly one of the biggest frauds in U.S. history.
Prosecutors notified the judge Monday that Bankman-Fried used a virtual private network, or VPN, to access the internet twice in the last two weeks, including once after last Thursday’s hearing, which focused on restricting his communications.
Prosecutors said in a letter to the judge that a VPN blocks third parties like the government from seeing his online activity, including what websites he visits or what data is sent and received online.
They noted that defense lawyers had correctly pointed out that many people use VPNs for benign purposes.
But prosecutors said a VPN can also be used to disguise the use of international cryptocurrency exchanges, to transfer data without detection and to access the dark web.
On Tuesday, Bankman-Fried’s attorneys—Mark Cohen and Christian Everdell—wrote to the judge to say their client will not use the VPN until the questions about it are resolved.
They defended his use of it, saying he accessed the VPN on Jan. 29 to watch NFL championship games that determine which teams go to the Super Bowl and again on Sunday for the Super Bowl.
The lawyers said Bankman-Fried’s use of the network was not for any of the reasons that the government said were concerns.
Bankman-Fried, 30, has pleaded not guilty to charges lodged against him in December, when he was brought from the Bahamas to the United States. FTX filed for bankruptcy on Nov. 11 after it ran out of money in the cryptocurrency equivalent of a bank run.
He has been confined with electronic monitoring to his parents’ home in Palo Alto, California, after his release on a $250 million personal recognizance bond. A trial has been tentatively set for early October.
Besides cheating investors, he’s also charged with using money he stole from investors to finance political donations as well as risky trades at Alameda Research, his cryptocurrency hedge fund trading firm.
