Sam Bankman-Fried's Robinhood holdings show how the FTX founder tried to cloak his misuse of customers' funds, prosecutors allege

• Prosecutors say Sam Bankman-Fried's use of his Robinhood stock show how he tried to cloak his alleged crimes.
• The FTX founder has pleaded not guilty to fraud and other criminal charges related to use of customer funds.

US prosecutors have said FTX founder Sam Bankman-Fried's handling of his Robinhood shares shows how he tried to cloak his alleged crimes, in their latest broadside in an argument over his bail conditions.

Bankman-Fried got the Robinhood stock, currently worth around $450 million, by illegally borrowing funds deposited by now-bankrupt crypto exchange FTX, the prosecutors have alleged. The former CEO faces criminal charges over what authorities have described as one of the biggest financial frauds in history, and has been released on bail after pleading not guilty.

CNN and Reuters reported Tuesday that the Department of Justice (DOJ) had written to Judge Lewis Kaplan to argue that Bankman-Fried should have his access to assets restricted, following a proposal by his lawyers to ease bail conditions.

The prosecutors argued that Bankman-Fried's attempts to control $460 million of Robinhood stock showed he was trying to mask his alleged crimes, per CNN. The Department of Justice seized the roughly 55 million shares earlier in January.

"Since the Government's seizure, the defendant has claimed that he would direct the majority of these funds toward making customers whole, but the original circumstances of the purchase of these shares, through a foreign special purpose vehicle with no public connection to FTX or Alameda, further indicate the steps the defendant has taken to obscure his criminal misuse of FTX customer property," the DOJ wrote in its letter filed Monday, acccording to reports.

Bankman-Fried has consistently promised to make FTX users whole since the exchange collapsed in November, though the company's new bosses have said that wouldn't $181 million worth of crypto left in its funds wouldn't be enough.

In a letter Saturday, Bankman-Fried's lawyers said prosecutors had "sandbagged" the FTX founder in their demands over bail conditions, which covered his communications as well as access to assets.

Prosecutors called for a ban on the FTX founder speaking with former or current FTX employees, or using encrypted messaging apps like Signal.

The prosecutor request came after Bankman-Fried was accused of witness tampering linked to FTX's US general counsel, after he sent a Signal message and email to Ryne Miller, a witness in the case.

But his lawyers argued Bankman-Fried should be able to communicate with employees without the presence of counsel, and that he should have his access to FTX and Alameda Research assets reinstated.

The disgraced FTX founder will have to forfeit $700 million in stock if found guilty of fraud, most of which is in Robinhood stock.

Christian Everdell and Mark Cohen, lawyers representing Bankman-Fried, didn't immediately respond to Insider's request for comment.