By Luc Cohen and Jonathan Stempel
NEW YORK (Reuters) - A U.S. judge on Wednesday tightened Sam Bankman-Fried's bail conditions by restricting his ability to communicate publicly, and said he will consider jailing him before the trial over the collapse of his FTX cryptocurrency exchange.
At a hearing in Manhattan federal court, prosecutors asked U.S. District Judge Lewis Kaplan to detain Bankman-Fried now, saying he had "crossed a line" by sharing his former romantic partner Caroline Ellison's personal writings with a reporter, in what they said amounted to a second instance of witness tampering.
Kaplan imposed a "gag order" previously requested by prosecutors for the 31-year-old Bankman-Fried, and gave both sides until Aug. 3 to explain their views on whether jail is necessary for the former billionaire.
"I'm very mindful of the government's interest in this issue, which I take seriously," Kaplan said. "Mr. Bankman-Fried, you'd better take it seriously too."
Mark Cohen, a lawyer for Bankman-Fried, said his client was trying merely to protect his reputation by communicating with journalists, and that it "really would be almost impossible" to prepare for the Oct. 2 trial if Bankman-Fried were jailed.
Bankman-Fried has been largely confined to his parents' home in Palo Alto, California, since his extradition in December from the Bahamas, where he was arrested and where FTX was based.
He has pleaded not guilty to charges he stole billions of dollars in FTX customer funds in part to plug losses at his crypto hedge fund, Alameda Research.
Ellison, who was Alameda's chief executive, is one of three former members of Bankman-Fried's inner circle who pleaded guilty to fraud charges and agreed to cooperate with prosecutors. She is expected to testify against Bankman-Fried.
MORE THAN 1,000 CALLS WITH REPORTERS
Last Thursday, the New York Times published an article containing excerpts from Ellison's personal Google (NASDAQ:GOOGL) documents prior to FTX's collapse.
She described being "unhappy and overwhelmed" with her job and feeling "hurt/rejected" from the break up of her personal relationship with Bankman-Fried.
Though Bankman-Fried acknowledged sharing Ellison's writings with a Times reporter, prosecutor Danielle Sassoon from the Manhattan U.S. Attorney's office said it constituted the second time he had tampered with a witness.
She cited a January 2023 email to FTX's U.S. general counsel, in which Bankman-Fried proposed entering a "constructive relationship."
Sassoon said Bankman-Fried has had more than 1,000 phone calls with journalists.
She said this alone did not constitute tampering, but said Bankman-Fried's strategy for rehabilitating his reputation appeared built on discrediting and blaming Ellison.
"This latest incident is an escalation of an ongoing campaign with the press that has now crossed a line," Sassoon said, referring to the Ellison writings. "This isn't a First Amendment issue."
Sassoon also expressed concern about what Bankman-Fried might have told the best-selling author Michael Lewis, who plans to publish a book about FTX around when the trial begins.
Bankman-Fried had previously consented to a gag order, but asked that it also apply to other witnesses such as current FTX Chief Executive John Ray. Ray, a veteran bankruptcy specialist who was named CEO after FTX filed for bankruptcy in November, has since been a strong Bankman-Fried critic.
Sassoon said at Wednesday's hearing that prosecutors did not expect to have Ray testify.
Later in the day, prosecutors said in a court filing that they would no longer include a charge accusing Bankman-Fried of violating U.S campaign finance laws at his upcoming trial.