FTX Update: Court Proposes Restricting SBF's Computer and Internet Use, Decides Not to Appoint Independent Examiner

At present, FTX creditors can only place all their hopes on the new CEO John Ray and the restructuring team, as the court has rejected the appointment of an independent examiner; additionally, US prosecutors, concerned about SBF's potential collusion, have requested further restrictions on SBF's use of electronic devices such as computers, phones, and the internet.

Two Guarantors Revealed

Earlier reports indicated that the $250 million bail agreement for SBF was based on a court appearance bond, requiring no cash payment, with four individuals jointly guaranteeing, two of whom are SBF's parents, Allan Joseph Bankman and Barbara Fried.

According to the released legal documents, Stanford Law School's Honorary Dean Larry Kramer and Senior Research Scientist Andreas Paepcke were the two previously undisclosed guarantors, each signing for $500,000 and $200,000 respectively.

Larry Kramer told The Block that he signed as an individual and had no commercial interest in this case:

Joseph Bankman and Barbara Fried have been close friends of my wife and me since the mid-1990s. Over the past two years when my family was fighting cancer, they were our most sincere friends, bringing food, providing emotional support, offering help, and in turn, I helped them when they faced a crisis.

Proposed Bail Conditions Amendment

On 2/15, U.S. Attorney Damian Williams wrote to the judge, requesting further restrictions on SBF's use of computers, phones, electronic devices, and the internet.

He mentioned SBF's previous attempts to contact witnesses through encrypted messaging software:

Legal documents suggest the defendant appeared to be trying to evade monitoring and find loopholes in the bail conditions. Therefore, the appropriate action is to further restrict the defendant's access to phones, tablets, computers, and the internet.

He suggested SBF only be allowed to use a monitored computer and phone in the future, with access limited to Gmail, phone calls, text messages, and contacting his lawyers via Zoom.

Damian Williams also recently requested the court to ban SBF from using VPN, while SBF's legal representatives argued that he only used VPN to watch the Super Bowl and did not engage in the activities Damian Williams alleged, such as accessing the dark web.

Court Rules Against Appointing Independent Examiner

Previously, a motion was jointly initiated by regulators from multiple U.S. states to appoint a third-party financial examiner for FTX under federal bankruptcy law.

The motion was led by the Texas Securities Commission and supported by over ten regulatory agencies from California, Florida, Hawaii, Idaho, Washington D.C., among others, emphasizing the lack of transparency in FTX debtor's financial situation and assets, stating that appointing an independent examiner would serve the best interests of creditors.

According to The Block, Judge John Dorsey has denied the request:

I fully agree that appointing an independent examiner is not in the best interest of creditors. In cases like this, every dollar of administrative costs is a dollar less for the creditors.

He believes that FTX's current CEO John Ray is completely independent from the previous management of FTX and is highly qualified to handle the bankruptcy case, returning assets to creditors and users.

John Dorsey also mentioned that some former FTX employees are still with the company, but these employees have not been accused of any mismanagement, and according to John Ray, these former employees are no longer involved in decision-making.