Judge still thinks proposed Bankman-Fried bail conditions too lenient

FILE PHOTO: Former FTX Chief Executive Sam Bankman-Fried arrives to the Manhattan federal court in New York

By Luc Cohen and Jody Godoy

NEW YORK (Reuters) -A U.S. judge on Friday said he remained unsatisfied with a proposal to impose tight restrictions on how the indicted FTX cryptocurrency exchange founder Sam Bankman-Fried communicates with the outside world while free on bail.

Bankman-Fried is fighting to stay out of jail pending his scheduled Oct. 2 fraud trial, with U.S. District Judge Lewis Kaplan expressing concern the former billionaire was testing the limits of his $250 million bail package.

Prosecutors have charged Bankman-Fried, 31, with stealing billions of dollars in FTX customer funds to plug losses at his hedge fund Alameda Research, and making tens of millions of dollars in illegal political donations to buy influence in Washington, D.C.

Bankman-Fried’s behavior while on bail became an issue after prosecutors said he tried to contact FTX Chief Executive John Ray and an in-house lawyer, in a possible attempt to tamper with witnesses. Defense lawyers said Bankman-Fried was trying to help, not interfere.

Last Friday, prosecutors and defense lawyers proposed letting Bankman-Fried have a flip phone with no internet capability and a basic laptop with limited functions, but be forbidden from using other electronic communication devices.

But at Friday’s hearing, Kaplan said Bankman-Fried was “inventive,” and could find a way to circumvent the restrictions and secretly communicate with others electronically.

“He could find a way around it and conceivably not get caught,” Kaplan said.

Christian Everdell, a lawyer for Bankman-Fried, said he would work with prosecutors on a new proposal to address the judge’s concerns.

Late last month, prosecutors added new fraud and conspiracy charges against Bankman-Fried over the November collapse of his now-bankrupt exchange, meaning he now faces 12 charges.

He had pleaded not guilty to the original eight charges in January.

Three of his former closest associates have pleaded guilty and are cooperating with prosecutors: former Alameda CEO Caroline Ellison, former FTX technology chief Gary Wang and former FTX engineering chief Nishad Singh.

(Reporting by Luc Cohen and Jody Godoy in New York; Editing by Lincoln Feast and Daniel Wallis)