Daniel Friedberg, FTX’s former top lawyer, has cooperated with U.S. prosecutors as they inspect the crypto firm’s downfall, a source close to the matter said, adding pressure on creator Sam Bankman-Fried who was detained in December for criminal fraud charges.
Friedberg provided details about FTX in a Nov. 22 meeting with 24 investigators, the person said. According to the source, the meeting occurred at the United States Attorney for the Southern District of New York bureau and had officials from the U.S. Securities and Exchange Commission, the Justice Department, and the Federal Bureau of Investigation .
At the meeting, the source stated that he informed prosecutors of Bankman-Fried’s use of customer funds to finance his business empire.In addition, the source said that Friedberg recounted conversations with other top executives and provided specifics of how Alameda Research, Bankman-hedge Fried’s fund, worked.
Friedberg’s cooperation has yet to be reported. However, the source said that he has not been charged, nor is he under criminal investigation. Instead, the person said he expects to be called a government witness in Bankman-Fried’s October trial.
Last month, Manhattan U.S. Attorney Damian Williams, leading the criminal case against now-bankrupt FTX, said: “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it.”
Gary Wang, FTX’s former CTO officer, and Caroline Ellison, Alameda’s former chief executive, two of Bankman-Fried’s closest associates, pleaded guilty to fraud and agreed to cooperate. However, both their lawyers refused to comment.
MEETING WITH PROSECUTORS
On Nov. 11, FTX filed for bankruptcy protection. Several days later, on Nov. 14, Friedberg accepted a call from two New York-based FBI agents. According to a person acquainted with the matter, he told them he was ready to share information but needed to ask FTX to suspend his attorney-client privilege.
According to the email seen by Reuters, Friedberg wrote to FTX the following day, asking the company to reject his privilege so he could cooperate with prosecutors. According to the person, FTX did not do so but agreed with Friedberg on what he may give investigators.
Friedberg then reported to the two FBI agents, informing them in an email: “I want to cooperate in all respects.”
According to the source, the U.S. Attorney’s Office arranged a meeting where Friedberg signed so-called proffer letters prepared by the SEC and other agencies, and participants exchanged emails. Proffer letters typically describe a probable agreement between authorities and people who are witnesses or subjects of an investigation.
“THROUGH THICK AND THIN”
Before his work advising FTX, Friedberg suggested a combination of banking, fintech, and online gaming companies.
Excapsa Software, a Canadian online gaming firm, one of his previous employers, where he was general counsel, also attracted controversy due to a cheating scandal, including a poker site it operated called Ultimate Bet. In 2008, the Canadian Gaming Commission penalized Ultimate Bet $1.5 million for failing to adopt fraud-prevention measures. Excapsa has since dissolved.
According to an audio recording available, Friedberg and some other Ultimate Bet associates secretly discussed that year how to manage the scandal and reduce the number of reimbursements owed to players. Friedberg priorly mentioned to NBC News that the audio was recorded illegally, but NBC’s article did not state Friedberg challenged its authenticity.
Friedberg originally represented Bankman-Fried as outside counsel in 2017 while at the U.S. law firm Fenwick & West, where he oversaw the payment systems group, according to a source familiar with the situation. At the time, the source said Friedberg recommended Bankman-Fried to run Alameda, which he founded in the same year.
Friedberg came in-house as FTX’s chief regulatory officer in 2020 when Bankman-Fried launched a new exchange for U.S. consumers named FTX.US.
In a recently deleted blog post published that year on FTX’s website, Bankman-Fried reported that Friedberg was FTX’s legal advisor “from the very start,” noting he had been “with us through thick and thin.”
According to the source, Friedberg quit his position on Nov. 8, a day after Bankman-Fried revealed to top executives that FTX was bankrupt. Three additional people briefed on the talks, along with text messaging his legal team exchanged at the time.
- Published By Team Australia News