FTX’s former top lawyer Daniel Friedberg has cooperated with US prosecutors as they examine the crypto agency’s collapse, a supply accustomed to the matter stated, including strain on founder Sam Bankman-Fried who was arrested on felony fraud costs final month.
Friedberg gave particulars about FTX in a November 22 assembly with two dozen investigators, the individual stated. The assembly, held on the US Attorney for the Southern District of New York’s workplace included officers from the Justice Department, Federal Bureau of Investigation, and the US Securities and Exchange Commission, the supply stated. Emails between attendees scheduling the assembly with these businesses had been seen by Reuters.
At the assembly, he advised prosecutors what he knew of Bankman-Fried’s use of buyer funds to finance his enterprise empire, the supply stated. Friedberg recounted conversations he had with different top executives on the topic and supplied particulars of how Bankman-Fried’s hedge fund Alameda Research functioned, the supply stated.
Friedberg’s cooperation has not been beforehand reported. He has not been charged and has not been advised he’s beneath felony investigation, the supply stated. Instead, he expects to be known as as a authorities witness in Bankman-Fried’s October trial, the individual stated.
Friedberg’s lawyer, Telemachus Kasulis, the FBI and FTX didn’t reply to requests for touch upon his cooperation. The SEC, the Department of Justice and Bankman-Fried’s spokesman declined to remark.
Bankman-Fried is accused of diverting billions of {dollars} in FTX shopper funds to Alameda to bankroll enterprise investments, luxurious actual property purchases, and political donations. On Tuesday, he pleaded not responsible in Manhattan federal court docket.
Read: Bankman-Fried set to enter not responsible plea in FTX fraud case
Manhattan U.S. Attorney Damian Williams, who’s main the felony case towards now bankrupt FTX, stated final month: “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it.”
Two of Bankman-Fried’s closest associates, Caroline Ellison, Alameda’s former chief government, and Gary Wang, FTX’s former chief expertise officer, pleaded responsible to fraud and agreed to cooperate. A lawyer for Ellison didn’t reply to a request for remark. Wang’s lawyer declined to remark.
Meeting with prosecutors
FTX filed for chapter safety on November 11. A number of days later, on November 14, Friedberg acquired a name from two FBI brokers based mostly in New York. He advised them he was prepared to share data however wanted to ask FTX to waive his attorney-client privilege, in accordance with an individual accustomed to the matter and emails considered by Reuters.
Friedberg wrote to FTX the subsequent day asking the corporate to waive his privilege so he may cooperate with prosecutors, in accordance with the e-mail seen by Reuters. FTX didn’t achieve this, however agreed with Friedberg on the factors he may confide in investigators, the individual stated.
Friedberg then wrote again to the 2 FBI brokers, telling them in an e mail reviewed by Reuters: “I want to cooperate in all respects.”
The US Attorney’s Office arrange a gathering the place Friedberg signed so-called proffer letters ready for him by the SEC and different businesses, in accordance with the supply and an e mail exchanged by individuals. Proffer letters usually describe a possible settlement between authorities and people who’re witnesses or topics of an investigation.
‘Through thick and thin’
Prior to his work advising FTX, Friedberg suggested a mixture of banking, fintech, and on-line gaming firms.
One of his earlier employers, a Canadian on-line gaming agency named Excapsa Software, the place he was basic counsel, additionally drew controversy as a consequence of a dishonest scandal involving a poker website it operated known as Ultimate Bet. A Canadian gaming fee in 2008 fined Ultimate Bet $1.5 million for failing to implement measures to forestall fraudulent actions. Excapsa has since dissolved.
According to an audio recording obtainable on the website PokerNews, Friedberg and another Ultimate Bet associates privately mentioned that yr learn how to deal with the scandal and minimise the quantity of refunds owed to gamers. Friedberg previously told NBC News that the audio was illegally recorded however NBC’s article didn’t say that Friedberg challenged its authenticity.
Friedberg first represented Bankman-Fried in 2017 as outdoors counsel whereas at US regulation agency Fenwick & West, the place he chaired its cost programs group, the supply accustomed to the matter stated. At the time, the supply stated Friedberg suggested Bankman-Fried on working Alameda, which he based that yr.
Read: How FTX purchased its technique to turn into the ‘most regulated’ crypto alternate
FTX’s programs gave Alameda trades a secret pace edge, CFTC says
In 2020, when Bankman-Fried launched a separate alternate for US prospects known as FTX.US, Friedberg moved in-house as FTX’s chief regulatory officer.
In a now-deleted weblog submit revealed that yr on FTX’s web site, Bankman-Fried wrote that Friedberg was FTX’s authorized advisor “from the very beginning,” noting he had been “with us through thick and thin.”
Friedberg resigned from his place on November 8, a day after Bankman-Fried disclosed to top executives that FTX was virtually out of cash, in accordance with the supply and three different folks briefed on the talks, together with textual content messages his authorized staff exchanged on the time.
