Former FTX “chief regulatory officer” Dan Friedberg allegedly helped to steal billions of dollars in customer funds on the cryptocurrency platform while serving as a private “fixer” for disgraced founder Sam Bankman-Fried, in response to a bombshell lawsuit.
Within the lawsuit filed Tuesday in Delaware bankruptcy court, FTX’s current caretakers alleged that Friedberg – a lawyer with ties to the notorious UltimateBet online poker cheating scandal – helped Bankman-Fried within the “wholesale raiding of customer exchange deposits.”
Friedberg was allegedly involved in “whitewashing complaints by whistleblowers” about misuse of those funds – at one point paying “exorbitant hush money” to an unnamed former FTX worker who raised alarms, the suit alleged.
“With regard to multiple whistleblower complaints alleging corporate malfeasance, Friedberg served as Bankman-Fried’s fixer,” the grievance said. “He not only settled the complaints for inflated amounts, in some instances he arranged for the FTX Group to retain the whistleblowers’ attorneys post-settlement, thereby buying or otherwise ensuring their silence.”
Friedberg held top compliance roles at FTX while also serving as the overall counsel at Alameda Research – the doomed cryptocurrency hedge fund run by Bankman-Fried’s ex-girlfriend Caroline Ellison.
Bankman-Fried is alleged to have stolen billions in FTX customer funds to prop up dangerous bets at Alameda, buy up ritzy real estate and make significant political donations. He has pleaded not guilty and is ready to face trial in Manhattan federal court on various charges this fall.
Within the bankruptcy court filing, FTX officials alleged that Friedberg “personally received tens of millions of dollars in unjustified bonuses and other compensation” while working at the corporate.
Friedberg was purportedly “rewarded for his 22 months of ‘service at Alameda and the FTX US exchange” with a windfall that included “cryptocurrency price tens of tens of millions of dollars, in addition to handsome monetary compensation and a bonus in excess of $3 million.”
FTX is in search of to claw back the cash.
“Plaintiffs seek to get better damages brought on by breaches of Friedberg’s fiduciary duties, legal malpractice, and other wrongdoing, and to get better all amounts fraudulently transferred to Friedberg, including any cryptocurrency, bonuses, and another things of value,” the suit said.
The lawsuit alleged that Joe Bankman, Bankman-Fried’s father and a Stanford law professor, had personally vouched for Friedberg and urged his son to present him a “central role” at FTX.
Bankman told his son to “keep Friedberg ‘within the loop…so now we have one person on top of all the pieces,’” in response to the suit.
An attorney for Friedberg and a representative for Bankman-Fried didn’t immediately reply to requests for comment on the lawsuit.
In a filing earlier this week, FTX officials mentioned a “senior FTX Group attorney” who had “actively facilitated and covered up the FTX Group’s commingling of customer and company funds.”
That filing didn’t mention Friedberg by name, however the Wall Street Journal reported he was the attorney being referenced.
The previous filing detailed one episode through which the unnamed “attorney-1” had given a $1 million “bonus” to a former Bahamian government official so as to “procure a mandatory business license for FTX DM inside ten weeks.”
Friedberg has faced intense scrutiny since FTX’s stunning collapse out of business last November.
As The Post reported on the time, Friedberg formerly served as attorney for UltimateBet, a once-popular online poker platform that crumbled within the 2000s following revelations that some insiders had access to an exploit dubbed “God Mode” that allowed them to see players’ hidden cards.
The scheme ensnared outstanding victims, including actor Ben Affleck, and bilked players out of tens of tens of millions of dollars before UltimateBet eventually shut down.
In leaked audio published in 2013 and still widely available online, Friedberg coached UltimateBet executives on methods to downplay the situation and minimize restitution payments to victims. Friedberg later told NBC News that the meeting was illegally recorded, but didn’t dispute its authenticity.
Friedberg was never charged with against the law for his work with UltimateBet and there isn’t a indication he was ever investigated by authorities or regulators.
Friedberg has not faced any criminal charges for his work at FTX. In January, Reuters reported that he had flipped on Bankman-Fried and had been cooperating with the feds as they investigated the corporate’s downfall.
Inside days of FTX’s bankruptcy last November, Friedberg reportedly told FBI agents in an email that he wanted “to cooperate in all respects.”
Ellison and at the very least two other former FTX executives, Nishad Singh and Gary Wang, are also cooperating with authorities.