U.S. says FTX founder Sam Bankman-Fried needs limits on communications, asset access
Mon, January 30, 2023
By Jonathan Stempel
NEW YORK (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)
Prosecutors seek to cut off Sam Bankman-Fried’s access to FTX employees amid trial
Anders Hagstrom
FOX NEWS
Sun, January 29, 2023
The Justice Department is seeking to ban former FTX founder Sam Bankman-Fried from contacting any of the company's employees in an effort to protect potential witnesses.
DOJ prosecutors made the request Friday after alleging that Bankman-Fried had spoken with an FTX employee who may serve as a witness, The Wall Street Journal reported. Bankman-Fried faces fraud charges relating to the downfall of FTX late last year.
Prosecutors say Bankman-Fried reached out to the general counsel of FTX's U.S. operation. They reportedly seek an order from the judge mandating that the accused not speak with current or former FTX employees without a lawyer present.
"Potential witnesses have described relevant and incriminating conversations with the defendant that took place on Slack and Signal that have already been autodeleted because of settings implemented at the defendant’s direction," prosecutors wrote in a request.
Sun, January 29, 2023
The Justice Department is seeking to ban former FTX founder Sam Bankman-Fried from contacting any of the company's employees in an effort to protect potential witnesses.
DOJ prosecutors made the request Friday after alleging that Bankman-Fried had spoken with an FTX employee who may serve as a witness, The Wall Street Journal reported. Bankman-Fried faces fraud charges relating to the downfall of FTX late last year.
Prosecutors say Bankman-Fried reached out to the general counsel of FTX's U.S. operation. They reportedly seek an order from the judge mandating that the accused not speak with current or former FTX employees without a lawyer present.
"Potential witnesses have described relevant and incriminating conversations with the defendant that took place on Slack and Signal that have already been autodeleted because of settings implemented at the defendant’s direction," prosecutors wrote in a request.
Sam Bankman-Fried, the founder and chief executive of FTX, in Nassau, Bahamas, on April 26, 2022.
Prosecutors claim Bankman-Fried wrote to FTX general counsel Ryne Miller, saying he "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."
SAM BANKMAN-FRIED TWEETS AWAY WHILE UNDER HOUSE ARREST
Prosecutors say such a conversation may have led to witness tampering.
"Were the defendant to ‘vet’ his version of relevant events with potential witnesses, that might have the effect of discouraging witnesses from testifying in a manner contrary to the defendant’s narrative," the Justice Department said in the filing.
Bankman-Fried expressed his surprise at prison conditions in an interview with Forbes last week, stating that he had expected the experience to mirror the Shawshank Redemption film.
"I thought that it was going to be like The Shawshank Redemption," he said, going on to lament the lack of internet access.
FTX founder Sam Bankman-Fried leaves Manhattan Federal Court after his arraignment and bail hearings on December 22, 2022 in New York City.
"I didn't realize how much more important than everything else combined internet access is to me, but that was like 80% of the total cost of being in prison, " he said, noting that he would occasionally get access to a newspaper.
Fox News' Julia Musto contributed to this report.
FTX Seeks to Remove Turkish Units From Bankruptcy Case
Jack Schickler
Mon, January 30, 2023
AYHAN ALTUN
Crypto exchange FTX is seeking to remove its Turkish units from the scope of its bankruptcy case, saying in a Friday court filing that Turkish authorities are unlikely to follow instructions from U.S. courts.
FTX filed for bankruptcy on Nov. 11 in Delaware, and its new owners are attempting to unwind the affairs of as many as 134 entities across the world.
Within days of the bankruptcy filing, Turkish law enforcement announced a probe into FTX's activities, and on Nov. 23, authorities ordered the seizure of virtually all FTX's assets in Turkey, making it fruitless to include them in wider restructuring plans, the new U.S. management said.
“The orders entered by this court do not have legal or practical effect in Turkey, and the debtors have no reason to believe that the Turkish government will comply with this court’s orders,” FTX said in the filing with the U.S. Bankruptcy Court in Delaware. “As a result, the debtors are unable to exercise sufficient control over the affairs of the Turkish debtors in order to comply with their duties under the bankruptcy code.”
The request concerns FTX Turkey, a local exchange 80% owned by parent company FTX Trading Ltd. and SNG Investments, a wholly owned subsidiary of FTX’s affiliated trading arm, Alameda Research. Both are described in the filing as “not strategic” within the corporate group, with assets and activities largely confined to Turkey.
The parent company can still take action under Turkish law, and some Turkish creditors have already started filing private claims in local courts, the filing said. CoinDesk has previously reported that staff often put their paychecks into the company because of their distrust of local banks and depreciation of the lira.
A hearing on the issue is schedule for March 8. Non-U.S. creditors of the exchange, fearing they may be overlooked by U.S. proceedings, have sought to ensure their representation in the case by forming a committee that can intervene on their behalf.
Read more: Turkish Authorities Order Seizure of 'Suspicious' FTX Assets
Jack Schickler
Mon, January 30, 2023
AYHAN ALTUN
Crypto exchange FTX is seeking to remove its Turkish units from the scope of its bankruptcy case, saying in a Friday court filing that Turkish authorities are unlikely to follow instructions from U.S. courts.
FTX filed for bankruptcy on Nov. 11 in Delaware, and its new owners are attempting to unwind the affairs of as many as 134 entities across the world.
Within days of the bankruptcy filing, Turkish law enforcement announced a probe into FTX's activities, and on Nov. 23, authorities ordered the seizure of virtually all FTX's assets in Turkey, making it fruitless to include them in wider restructuring plans, the new U.S. management said.
“The orders entered by this court do not have legal or practical effect in Turkey, and the debtors have no reason to believe that the Turkish government will comply with this court’s orders,” FTX said in the filing with the U.S. Bankruptcy Court in Delaware. “As a result, the debtors are unable to exercise sufficient control over the affairs of the Turkish debtors in order to comply with their duties under the bankruptcy code.”
The request concerns FTX Turkey, a local exchange 80% owned by parent company FTX Trading Ltd. and SNG Investments, a wholly owned subsidiary of FTX’s affiliated trading arm, Alameda Research. Both are described in the filing as “not strategic” within the corporate group, with assets and activities largely confined to Turkey.
The parent company can still take action under Turkish law, and some Turkish creditors have already started filing private claims in local courts, the filing said. CoinDesk has previously reported that staff often put their paychecks into the company because of their distrust of local banks and depreciation of the lira.
A hearing on the issue is schedule for March 8. Non-U.S. creditors of the exchange, fearing they may be overlooked by U.S. proceedings, have sought to ensure their representation in the case by forming a committee that can intervene on their behalf.
Read more: Turkish Authorities Order Seizure of 'Suspicious' FTX Assets
BlockFi's Crypto Mining Assets May Be Headed to Market After Bankruptcy Hearing
Jack Schickler
Mon, January 30, 2023
Scott Olson
Failed crypto lender BlockFi appears on track to sell some assets after a bankruptcy judge in New Jersey expressed approval of the plan as part of Chapter 11 bankruptcy proceedings designed to restore funds to creditors.
Under a proposal put to the bankruptcy court on Monday, bidders for BlockFi's crypto mining assets would have until Feb. 20 to submit bids, with an auction the following week.
“I think it's a workable and certainly an expeditious and efficient process that's contemplated,” Judge Michael Kaplan said, after the U.S. government and a committee representing creditors withdrew their objections. “We'll all keep our fingers crossed that it produces significant results.”
The sale would be the first in a number of potential auctions, BlockFi’s attorneys told the court.
“We've received substantial interest in the market for certain asset packages and we expect to receive even more bids going forward,” Francis Petrie of law firm Kirkland & Ellis said after a Jan. 9 legal filing cited 35 potential counterparties. “Given the practical realities of the debtors’ circumstances, and the current volatility in the cryptocurrency market, we need to act quickly to preserve the value of our assets."
Robinhood
BlockFi’s attempts to get its hands on hundreds of millions of dollars worth of stocks in Robinhood Markets (HOOD), however, have taken a further turn following parallel legal proceedings in Antigua, the New Jersey court was told.
“On January 27, the court in Antigua granted Sam Bankman-Fried's motion to stay the liquidation proceedings,” said Richard Kanowitz of Haynes Boone, also representing BlockFi. “They granted leave to appeal, which he must file within 21 days.”
The 56 million shares, with a current value of around $577 million, are the subject of a complex tussle involving BlockFi, failed crypto exchange FTX, FTX founder Sam Bankman-Fried, the Antigua-based liquidators of the shell company that nominally owned the shares and the U.S. Department of Justice (DOJ).
According to court filings earlier in January, the shares have been seized by the DOJ, which is investigating Bankman-Fried, who has pleaded not guilty to charges including wire fraud. Bankman-Fried has also said he was willing to give the shares to FTX customers, though in court he opposed a related bid by FTX to claim ownership.
Dependent on FTX for a $400 million line of credit, BlockFi filed for Chapter 11 bankruptcy protection on Nov. 28, shortly after FTX did the same. On Friday, Kaplan approved a $10 million BlockFi bonus pot intended to keep staffers from leaving the company.
Read more: BlockFi’s $10M Staff Bonus Package Approved by NJ Bankruptcy Court Judge
Jack Schickler
Mon, January 30, 2023
Scott Olson
Failed crypto lender BlockFi appears on track to sell some assets after a bankruptcy judge in New Jersey expressed approval of the plan as part of Chapter 11 bankruptcy proceedings designed to restore funds to creditors.
Under a proposal put to the bankruptcy court on Monday, bidders for BlockFi's crypto mining assets would have until Feb. 20 to submit bids, with an auction the following week.
“I think it's a workable and certainly an expeditious and efficient process that's contemplated,” Judge Michael Kaplan said, after the U.S. government and a committee representing creditors withdrew their objections. “We'll all keep our fingers crossed that it produces significant results.”
The sale would be the first in a number of potential auctions, BlockFi’s attorneys told the court.
“We've received substantial interest in the market for certain asset packages and we expect to receive even more bids going forward,” Francis Petrie of law firm Kirkland & Ellis said after a Jan. 9 legal filing cited 35 potential counterparties. “Given the practical realities of the debtors’ circumstances, and the current volatility in the cryptocurrency market, we need to act quickly to preserve the value of our assets."
Robinhood
BlockFi’s attempts to get its hands on hundreds of millions of dollars worth of stocks in Robinhood Markets (HOOD), however, have taken a further turn following parallel legal proceedings in Antigua, the New Jersey court was told.
“On January 27, the court in Antigua granted Sam Bankman-Fried's motion to stay the liquidation proceedings,” said Richard Kanowitz of Haynes Boone, also representing BlockFi. “They granted leave to appeal, which he must file within 21 days.”
The 56 million shares, with a current value of around $577 million, are the subject of a complex tussle involving BlockFi, failed crypto exchange FTX, FTX founder Sam Bankman-Fried, the Antigua-based liquidators of the shell company that nominally owned the shares and the U.S. Department of Justice (DOJ).
According to court filings earlier in January, the shares have been seized by the DOJ, which is investigating Bankman-Fried, who has pleaded not guilty to charges including wire fraud. Bankman-Fried has also said he was willing to give the shares to FTX customers, though in court he opposed a related bid by FTX to claim ownership.
Dependent on FTX for a $400 million line of credit, BlockFi filed for Chapter 11 bankruptcy protection on Nov. 28, shortly after FTX did the same. On Friday, Kaplan approved a $10 million BlockFi bonus pot intended to keep staffers from leaving the company.
Read more: BlockFi’s $10M Staff Bonus Package Approved by NJ Bankruptcy Court Judge
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