Exclusive: Former FTX Top Lawyer Helped US Authorities in Bankman-Fried Case

Jan 5 (Reuters) – Former FTX top lawyer Daniel Friedberg cooperated with U.S. prosecutors as they investigate the crypto firm’s collapse, a source familiar with the matter said, adding pressure about founder Sam Bankman-Fried who was arrested for criminal fraud last month.

Friedberg gave details about FTX in a Nov. 22 meeting with two dozen investigators, the person said. The meeting, held at the U.S. Attorney’s Office for the Southern District of New York, included officials from the Department of Justice, the Federal Bureau of Investigation and the U.S. Securities and Exchange Commission, the source said. . Emails between attendees planning the meeting with these agencies were seen by Reuters.

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

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

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

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

Manhattan U.S. Attorney Damian Williams, who is leading the criminal case against the now-bankrupt FTX, said last month: “If you were involved in misconduct at FTX or Alameda, now is the time to take action. advance.”

Two of Bankman-Fried’s closest associates, Caroline Ellison, the former chief executive of Alameda, and Gary Wang, the former chief technology officer of FTX, pleaded guilty to fraud and agreed to cooperate. A lawyer for Ellison did not respond to a request for comment. Wang’s attorney declined to comment.

MEETING WITH PROSECUTORS

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

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

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

The U.S. 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 attendees. Cover letters typically outline a potential agreement between authorities and people who are witnesses or being investigated.

“THROUGH THICK AND THIN”

Prior to advising FTX, Friedberg advised a mix of banking, fintech and online gaming companies.

One of his former employers, a Canadian online gambling company named Excapsa Software, where he was general counsel, also sparked controversy due to a cheating scandal involving a poker site it 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. Excapsa has since been disbanded.

According to an audio recording available on the PokerNews website, Friedberg and 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 challenged its authenticity.

Friedberg first represented Bankman-Fried in 2017 as an outside attorney while working at US law firm Fenwick & West, where he chaired its payment systems group, the source familiar with the matter said. . At the time, the source said 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 chief regulatory officer of FTX.

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

Friedberg resigned from his post on November 8, a day after Bankman-Fried revealed to senior executives that FTX was almost out of money, according to the source and three others briefed on the talks, as well as text messages exchanged by his legal team on time.

Additional reporting by Hannah Lang; edited by Megan Davies and Anna Driver

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