Originally Published: 16 FEB 23 10:47 ET

By Allison Morrow and Kara Scannell, CNN

(CNN) -- FTX founder Sam Bankman-Fried is set to appear in New York federal court Thursday for the second time this week as a judge weighs a proposal from prosecutors to tighten the conditions of his bail.

Prosecutors on Wednesday asked Judge Lewis Kaplan to significantly restrict Bankman-Fried's use of cellphones, computers and the internet. They allege that Bankman-Fried found "loopholes" that allowed him to potentially violate the conditions of his bail, including use of a VPN, or virtual private network.

That request came two weeks after prosecutors said Bankman-Fried contacted a former FTX employee who is a potential government witness, prompting Kaplan to temporarily bar the former CEO from contacting any current or former employees of his now-collapsed crypto empire.

"There is now a record before the Court of a defendant who appears motivated to circumvent monitoring and find loopholes in existing bail conditions," prosecutors said in a letter to the judge Wednesday.

Long road to trial

Bankman-Fried, 30, pleaded not guilty last month to eight federal counts of fraud and conspiracy. He has repeatedly acknowledged missteps as the head of crypto trading platform FTX, but denies committing fraud.

Prosecutors say Bankman-Fried oversaw one of the largest financial frauds in American history, stealing customer deposits to fund political donations, luxury real estate deals and cover losses incurred by his crypto hedge fund, Alameda.

After his arrest in December, Bankman-Fried was released on a $250 million bond. He is under house arrest at his parents' home in Palo Alto, California, while he awaits trial in October. If convicted on all counts, he could face up to 115 years in prison.

In a letter to Judge Kaplan on Wedesday, prosecutors proposed limiting Bankman-Fried's use of electronic devices to prepare for trial, allowing only a Gmail account, voice calls and text messaging. He could use Zoom to communicate with this attorneys, they said.

They also asked the judge to limit Bankman-Fried to one computer and one cellphone, both of which would have monitoring systems. He would also have to make his devices available for search if there is a suspicion that he deviated from the bail conditions.

Prosecutors noted Bankman-Fried chose to use a VPN to watch the Super Bowl, even though it was readily available to watch in the United States. Although VPNs aren't uncommon, they can be used to disguise a computer's location and conceal online activities.

Bankman-Fried's attorneys said their client used a VPN only to watch postseason NFL games through an international subscription he'd previously purchased while living in the Bahamas.

Overcrowded jail vs. cushy California home

If Bankman-Fried violated the terms of his bail by using the VPN, Kaplan has the discretion to impose stricter terms or revoke the deal entirely. Revoking bail would land Bankman-Fried in a New York jail, a far cry from his parents' multimillion-dollar California home near the Stanford University campus.

Typically, a court will impose further restrictions before revoking bail, said Howard Fischer, a partner at Moses Singer, who is not involved in the case.

"Bankman-Fried does not seem to have a sense of the seriousness of his situation," he said, citing the former billionaire's frequent public statements and engagement with media.

"For someone facing considerable jail time, he seems to be very confident in his ability to talk his way out of trouble," Fischer added.