Leaving SBF On Read

While disgraced crypto mogul Sam Bankman-Fried stays under house arrest at his parents' home in Palo Alto, he still seems to be meddling with bankruptcy proceedings in New York. Federal District Court Judge Lewis A. Kaplan has ordered that SBF "create a plan with prosecutors that would ensure Mr. Bankman-Fried did not delete text messages he sent while awaiting trial on charges that he orchestrated the theft of billions of dollars in customer deposits," reports the New York Times.

In other words, Judge Kaplan believes the notorious founder of FTX has been communicating with the company's general counsel, Ryne Miller, and other former FTX employees via messaging apps like Signal, which automatically deletes the texts. "I read all the spy novels," Judge Kaplan said, referring to methods of hiding communications. Even worrying that SBF could write encrypted handwritten letters.

  • "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. After learning this, the Government promptly informed defense counsel and raised concerns about the defendant’s use of a VPN," the US Attorney's office wrote to the court on February 13.
  • The issue of using encrypted and/or disappearing messaging apps to skirt communications rules (and destroy evidence) has come up before with major Wall Street firms using WhatsApp and Signal, raising concern from the SEC and DOJ.

Bill Pay

It was an expensive November for beleaguered crypto firm FTX, says Coinbase, which reported that Sullivan & Cromwell billed $9.5 million for 6,500 hours across 151 staff over the period November 12 through 30, 2022. But Sullivan & Cromwell says it charged a discount for senior staff, and is only seeking 80% of the total bill (or $7.5 million).

The Verdict

Every new story about SBF and how he’s handling FTX’s collapse is more outrageous than the last. If your strategy is to appear as though you didn’t know what was going on behind the scenes of your own company, then maybe don’t use Signal and VPNs to communicate with your general counsel or reach out to witnesses in your case. Not the best look.