“Deep throat”: this is the lawyer who sank Sam Bankman-Fried and FTX from the inside

Former FTX chief counsel Daniel Friedberg has cooperated with US prosecutors in the investigation into the crypto company’s collapse, a source familiar with the matter said, adding to the pressure on founder Sam Bankman-Fried.

05 January 2023 00.46

Friedberg provided details about FTX in a November 22 meeting with two dozen researchers. The meeting, held at the US Attorney’s office for the Southern District of New York, included officials from the Justice Department, the Federal Bureau of Investigation and the US Securities and Exchange Commission, a source said. Reuters saw emails between attendees who were scheduling the meeting with those agencies.

Damian Williams,

At the meeting, he told prosecutors what he knew about Bankman-Fried’s use of client funds to finance its business empire. Friedberg recounted conversations he had with other top executives on the subject and provided details of how Bankman-Fried’s Alameda Research hedge fund operated, the source said.

Sam Bankman-Fried preso
Sam Bankman-Fried preso

Friedberg’s cooperation has not been previously reported. He has not been charged and has not been told that he is under criminal investigation. Instead, he expects to be called as a government witness at the Bankman-Fried trial in October, according to the same source.

Friedberg’s attorney, Telemachus Kasulis, the FBI and FTX did not respond to requests for comment on their cooperation. The SEC, the Justice Department and a spokesman for Bankman-Fried declined to comment.

look also

What

Cu

Sam Bankman-Fried
Sam Bankman-Fried

Bankman-Fried is accused of diverting billions of dollars in FTX client funds to Alameda to finance venture investments, luxury real estate purchases and political donations. On Tuesday, he pleaded not guilty in Manhattan federal court.

look also

What

after

Manhattan US Attorney Damian Williams, who is leading the criminal case against the now-bankrupt FTX, said last month: “If you engaged in misconduct at FTX or Alameda, now is the time to come forward.”

Caroline Ellison.
Caroline Ellison.

Two of Bankman-Fried’s closest associates, Caroline Ellison, a former Alameda CEO, and Gary Wang, a former FTX CTO, have pleaded guilty to fraud and agreed to cooperate. An attorney for Ellison did not respond to a request for comment. Wang’s lawyer declined to comment.

FTX filed for bankruptcy on November 11. A few days later, on November 14, Friedberg received a call from two New York-based FBI agents. He told them that he was willing to share information, but that he needed to ask FTX to waive its attorney-client privilege, according to a person familiar with the matter and emails seen by Reuters.

FTX.
FTX.

Friedberg wrote to FTX the next day asking the company to waive its privilege so he could cooperate with prosecutors, according to the email seen by Reuters. FTX did not, but agreed with Friedberg on points it could disclose to investigators, the person said.

Friedberg later responded to the two FBI agents, telling them in an email reviewed by Reuters: “I want to cooperate in all aspects.”

Friedberg and Linkedin
Friedberg and Linkedin

The US Attorney’s Office arranged a meeting in which Friedberg signed so-called offer letters prepared for him by the SEC and other agencies, according to the source and an email exchanged by the participants. Offer letters generally describe a possible deal between law enforcement and people who are witnesses or subjects of an investigation.

“THROUGH THICK AND THIN”

Prior to his work as an advisor to FTX, Friedberg advised a mix of banking, fintech and online gaming companies.

One of his previous employers, a Canadian online gaming firm called Excapsa Software, where he was general counsel, also sparked controversy due to a cheating scandal involving a poker site he operated called Ultimate Bet. In 2008, a Canadian gaming commission fined Ultimate Bet $1.5 million for failing to enforce measures to prevent fraudulent activity. Since then, Excapsa has been dissolved.

The pandemic and remote work accelerated fraud and corruption

According to an audio recording available on the PokerNews website, Friedberg and some other Ultimate Bet associates discussed privately that year how to handle the scandal and minimize the amount of refunds owed to players. Friedberg previously told NBC News that the audio was illegally recorded, but the NBC article did not say that Friedberg questioned its authenticity.

Sam Bankman-Fried
Sam Bankman-Fried

Friedberg first represented Bankman-Fried in 2017 as outside counsel while working at US law firm Fenwick & West, where he chairs its payment systems group, the source familiar with the matter said. At the time, the source said that Friedberg advised Bankman-Fried on the management of Alameda, which he founded that year.

In 2020, when Bankman-Fried launched a separate exchange for US clients called FTX.US, Friedberg moved internally as FTX’s director of regulation.

In a now-deleted blog post published that year on FTX’s website, Bankman-Fried wrote that Friedberg was FTX’s legal counsel “from the beginning,” noting that he had been “with us through thick and thin.” “.

Friedberg resigned on Nov. 8, a day after Bankman-Fried revealed to top executives that FTX was nearly out of money, according to the source and three other people briefed on the conversations, along with text messages his company exchanged. legal team at the time.

  • by Angus Berwick for Reuters

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.