Samuel Bankman-Fried leaves Manhattan federal court in New York, Tuesday, Jan. 3, 2023. Bankman-Fried pleaded not guilty to charges that he cheated investors and looted customer deposits on his cryptocurrency trading platform as a judge set a tentative trial date for October. (AP Photo/Seth Wenig)
Days after a federal judge roasted the embattled cryptocurrency chief over a suspected violation of his pretrial release, Sam Bankman-Fried is under fire again for using a virtual private network for web surfing.
While the FTX chief’s lawyers claim their client just used the technology to watch the Super Bowl, federal prosecutors are not treating the development as a game.
“Today, it came to the Government’s attention—based on data obtained through the use of a pen register on the defendant’s gmail account—that the defendant used a VPN or ‘Virtual Private Network’ to access the internet on January 29, 2023, and February 12, 2023,” Assistant U.S. Attorney Danielle R. Sassoon wrote in a two-page letter on Monday night. “After learning this, the Government promptly informed defense counsel and raised concerns about the defendant’s use of a VPN.”
For now, Bankman-Fried remains free on a $250 million bond as he awaits trial on wire fraud and campaign finance charges. Prosecutors recently tried to change the terms of that pretrial agreement after Bankman-Fried, also known by his initials SBF, sent a message through the encrypted messaging app Signal to FTX’s general counsel asking to “vet things” through each other.
Senior U.S. District Judge Lewis Kaplan suggested that federal prosecutors were too permissive with SBF’s bond at a recent hearing, where he ordered the parties to agree to a more restrictive agreement. That was before prosecutors discovered that the FTX founder had been using a VPN, which hides a user’s IP address by routing it through a remote server run by the network’s host.
A form of internet cryptography, VPNs have many legal and mundane uses. Journalists use it to protect sources. Privacy-conscious individuals use it to protect their personal data from corporate exploitation, and people living under authoritarian regimes frequently turn to it to avoid government surveillance.
“As defense counsel has pointed out, and the Government does not dispute, many individuals use a VPN for benign purposes,” the government’s letter concedes.
The same technology, however, can also be used to try to elude law enforcement, and prosecutors say that Bankman-Fried’s use of it “raises several potential concerns.”
“For instance, it is well known that some individuals use VPNs to disguise the fact that they are accessing international cryptocurrency exchanges that use IPs to block U.S. users,” the letter states, adding that the technology also represents a “more secure and covert method of accessing the dark web.”
Prosecutors have not yet determined “how, if at all,” Bankman-Fried’s use of the VPN “affects the proposed bail conditions.”
Bankman-Fried’s lawyer Christian R. Everdell suggested that the matter was much ado about nothing.
“Further, we wish to note that, on the specific dates referenced by the Government, our client used the VPN to access an NFL Game Pass international subscription that he had previously purchased when he resided in the Bahamas, so that he could watch NFL playoff games,” Everdell wrote in a reply letter. “On January 29, 2023, he watched the AFC and NFC Championship games and on February 12, he watched the Super Bowl. This use of a VPN does not implicate any of the concerns raised by the Government in its letter.”
Everdell said that his client will avoid VPN use pending further discussions with the government.
“Nevertheless, in order to resolve the matter and as the Government notes, the defense is prepared to adopt a reasonable bail condition that allays any concerns of the Government or the Court about the use of a VPN. Our client will not use a VPN in the interim.”
The parties have asked to extend the deadline for a new proposed bond package until Friday.
Read the government’s letter below:
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