Federal prosecutors said FTX founder Sam Bankman-Fried’s efforts to control about $500 million worth of Robinhood shares last year indicates steps the former crypto entrepreneur has taken to “obscure” his alleged crimes.
Prosecutors have since seized the stock and other assets totaling more than $700 million after Bankman-Fried laid claim to the shares saying he legitimately bought them and needed the money to defend against the criminal charges he’s facing.
In a letter to Judge Lewis Kaplan involving Bankman-Fried’s bail, prosecutors argued he should still be prevented from moving FTX assets.
“Since the Government’s seizure, the defendant has claimed that he would direct the majority of these funds toward making customers whole, but the original circumstances of the purchase of these shares, through a foreign special purpose vehicle with no public connection to FTX or Alameda, further indicate the steps the defendant has taken to obscure his criminal misuse of FTX customer property,” they wrote.
The new allegation comes as prosecutors and lawyers for Bankman-Fried have been going back and forth over the terms of his bail after authorities alleged he made contact with the former general counsel of FTX in what they said suggests witness tampering.
Prosecutors want to limit who Bankman-Fried can be in touch with from FTX and its sister hedge fund Alameda Research. They also want to restrict him from using encrypted messaging apps after he previously used them at FTX with the auto-delete feature turned on.
Bankman-Fried’s lawyers asked for the limitations of his contact with FTX assets be lifted since prosecutors have not proven he was behind a mysterious transfer. They also proposed some limits to his contact with former employees.
Prosecutors have been suspicious of Bankman-Fried’s contact with Bahamian regulators after millions of dollars in assets were made available to customers there just before FTX filed for US bankruptcy court protection.
In the letter, they say Bankman-Fried told Gary Wang, a former top FTX executive who has pleaded guilty and is cooperating with prosecutors, “that he wanted to stall with the U.S. bankruptcy in order to assist the foreign regulators, whom he thought would be more lenient with him and who might permit him to regain control of FTX.”
Bankman-Fried was charged with stealing billions of dollars from FTX customers in what prosecutors have described as one of the largest financial frauds in US history.
Bankman-Fried has pleaded not guilty. He has been released on a $250 million bond.
Also on Monday, a federal judge granted numerous media organizations request to make public the names of individuals who co-signed Bankman-Fried’s bail.
The judge paused his ruling until February 7 to allow time for Bankman-Fried’s attorneys to appeal his ruling given the “novel” legal issue in the case.
Correction: A previous version of this article provided the wrong date for the judge to unpause his Monday ruling. The judge paused his ruling until February 7.
