Sam Bankman-Fried, the founder of the collapsed cryptocurrency exchange FTX, was sent to jail on Friday after a federal judge in New York revoked his bail, in a dramatic twist less than two months before the case was set for a widely anticipated trial.
Mr. Bankman-Fried, 31, had been under house arrest at his parents’ home in Palo Alto, Calif., since he was arrested in December on fraud charges stemming from FTX’s implosion. But at a hearing on Friday, Judge Lewis A. Kaplan of Federal District Court in Manhattan said that arrangement would have to end, after prosecutors argued that Mr. Bankman-Fried had given documents to the media to intimidate a witness in the case.
“He has gone up to the line over and over again, and I am going to revoke bail,” Judge Kaplan said of Mr. Bankman-Fried after reading his ruling from the bench.
After the order was read aloud, two U.S. marshals had Mr. Bankman-Fried remove his navy suit jacket as they prepared to handcuff him. Mr. Bankman-Fried’s parents were in attendance; his mother, Barbara Fried, tried approaching him but was cautioned to stand back by a court officer. Mr. Bankman-Fried was set to be taken to the Metropolitan Detention Center in Brooklyn.
Mr. Bankman-Fried’s lawyer, Mark Cohen, said in court that he intended to appeal. The judge declined to wait for the outcome of the appeal before sending Mr. Bankman-Fried to jail.
The courtroom scene was the latest humiliating blow to Mr. Bankman-Fried since his cryptocurrency company fell apart in one of the most stunning corporate implosions in recent memory. FTX rode the highs of the virtual currency market to become one of the industry’s leading companies before filing for bankruptcy after a run on deposits last fall. Over a few weeks, Mr. Bankman-Fried went from being an industry titan courted by politicians and celebrities to a criminal defendant facing decades in prison.
Now he will have to prepare for his trial, scheduled for Oct. 2, from a jail cell. The court dispute over his bail focused on an article in The New York Times published last month that described private writings by Caroline Ellison, an executive in Mr. Bankman-Fried’s business empire who also dated him. Ms. Ellison has pleaded guilty to fraud charges and agreed to cooperate with the prosecutors investigating Mr. Bankman-Fried.
In court filings, prosecutors said Mr. Bankman-Fried had given the documents to The Times to intimidate Ms. Ellison by casting her in a negative light ahead of his trial. They also noted that Mr. Bankman-Fried has had numerous conversations with other journalists, including the author Michael Lewis, who is writing a book about FTX that is set for publication the week the trial begins.
As the bail issue was debated in court filings in recent weeks, Judge Kaplan imposed a temporary gag order preventing the FTX founder from speaking to the media.
Lawyers for Mr. Bankman-Fried said that when he gave the documents to The Times, he was exercising his rights to answer “an inquiry from the media” and that he did not breach the terms of his bail. The Times, the Reporters Committee for Freedom of the Press and a documentarian making a film about Mr. Bankman-Fried each submitted court filings raising First Amendment concerns about the gag order.
The status of the order was not immediately clear after Friday’s hearing. But in court, Judge Kaplan said that “defendant speech is not protected if it is to bring about a crime.” He said that he had concluded that Mr. Bankman-Fried’s communications with the media were intended to “intimidate or also to influence” witnesses in the case.
A spokesman for Mr. Bankman-Fried declined to comment. A spokesman for the U.S. attorney’s office for the Southern District of New York, the unit prosecuting Mr. Bankman-Fried, did not respond to a request for comment.
Mr. Bankman-Fried was arrested in the Bahamas, where FTX was based, after the company imploded during a turbulent week in November. He was extradited to the United States and released on highly restrictive bail conditions that required him to wear an ankle monitor and stay confined to his parents’ house.
Since his release, Mr. Bankman-Fried has been reprimanded repeatedly for behavior that prosecutors said pushed the boundaries of what he was allowed to do while awaiting trial.
In court filings in January, the prosecutors presented evidence that Mr. Bankman-Fried had sent messages to a former FTX executive who could be a witness in the case. They also said Mr. Bankman-Fried had used a virtual private network, or VPN, a tool that prosecutors said could be used to access the internet without proper supervision.
At the time, Judge Kaplan ordered Mr. Bankman-Fried to submit to tighter bail requirements that restricted which websites he could use and prevented him from communicating with former FTX employees. Visitors to his parents’ house were prohibited from bringing phones or computers inside.
The Times’s article about Ms. Ellison included excerpts from private Google documents addressed to Mr. Bankman-Fried. At a court hearing on July 26, the prosecutors argued that the article showed Mr. Bankman-Fried was seeking to intimidate and discredit a key government witness.
“No set of release conditions can assure the safety of the community,” Danielle Sassoon, one of the prosecutors, said at that hearing. “The defendant has shown now that he is intent on exploiting the conditions of release and improperly influencing this trial.”
For Judge Kaplan, the article about Ms. Ellison was the final straw. By sharing the documents with The Times, Mr. Bankman-Fried intended to “portray Ms. Ellison in an unfavorable light,” he said on Friday.
As Mr. Bankman-Fried’s lawyers fought to keep the bail agreement in place, they argued that conditions at the detention center in Brooklyn would make it difficult for him to prepare for the trial.
Judge Kaplan said he was open to the possibility of transferring Mr. Bankman-Fried to an alternate facility, like a detention center in Putnam County, N.Y., where he would have more consistent computer access. Judge Kaplan said he was also willing to consider an arrangement that would allow Mr. Bankman-Fried to meet with his lawyers at their office, under heavy security.
For now, Mr. Bankman-Fried is set to be housed at the federal facility in Brooklyn.
Santul Nerkar contributed reporting.
David Yaffe-Bellany covers cryptocurrencies and financial technology. He graduated from Yale University and previously reported in Texas, Ohio, Connecticut and Washington, D.C. More about David Yaffe-Bellany
Matthew Goldstein covers Wall Street and white-collar crime and housing issues. More about Matthew Goldstein
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