The founder of the failed FTX cryptocurrency exchange was caught using a virtual private network that hides web browsing while out on bail.
Less than two weeks after being booted off messaging apps that encrypt or permanently delete messages while he awaits trial, former FTX CEO Sam Bankman-Fried raised the hackles of prosecutors by signing onto a VPN.
His use of a virtual private network "raises several potential concerns" said Assistant U.S. Attorney Danielle Sassoon in a letter to Judge Lewis Kaplan. "A VPN is a mechanism of encryption, hiding online activities from third parties, including the government."
Bankman-Fried is facing eight counts including wire and securities fraud related to the collapse of the FTX exchange and subsequent bankruptcy of some 100 related companies.
The news came while prosecutors and Bankman-Fried's attorneys are still working out details of the bail condition changes that would make permanent the court's temporary ban on the use of encrypted or ephemeral messaging services.
On Jan 15, Bankman-Fried used a Signal account set to delete messages after 30 days to contact a witness in his trial, suggesting to FTX US general counsel Ryne Miller that they rebuild "a constructive relationship… or at least vet things with each other."
Prosecutors said that was at least potentially witness tampering, and on Jan. 1, asked Federal District Judge Lewis Kaplan to amend the terms of his bail to ban their use.
The Known Unknowns
The government only learned of the VPN use because of a "pen register" on his Gmail account that records which IP addresses he visits but not what he does on those sites, Sassoon said.
Second, a VPN disguises the user's location, making it seem like they are signed on from whatever country or region is desired. That in turn means it can be used to access web content not otherwise accessible in the U.S. She said:
"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."
VPNs also allow undetectable data transfers and are "a more secure and covert method of accessing the dark web."
The Could-Have-Dones
While AUSA Sassoon did not spell it out, a VPN would allow Bankman-Fried to access cryptocurrency wallets that the government doesn't know about, move funds in them through mixing services, and buy more or less anything on darknet markets.
And, of course, it would let Bankman-Fried access the encrypted and record-free messaging services that he has agreed not to during the trial.
What Bankman-Fried did do, his attorney told the court, is watch the AFC and NFC Championship games and the Super Bowl on an NFL Game Pass he bought while still living in The Bahamas.
Judge Kaplan ordered Bankman-Fried to refrain from using a VPN until the new terms of his bail agreement can be worked out.
