FTX’s former high lawyer Daniel Friedberg has cooperated with U.S. prosecutors as they examine the crypto agency’s collapse, a supply aware of the matter mentioned, including strain on founder Sam Bankman-Fried who was arrested on prison fraud prices final month.
Friedberg gave particulars about FTX in a Nov. 22 assembly with two dozen investigators, the individual mentioned. The assembly, held on the U.S. Attorney for the Southern District of New York’s workplace included officers from the Justice Department, Federal Bureau of Investigation, and the U.S. Securities and Exchange Commission, the supply mentioned. Emails between attendees scheduling the assembly with these businesses had been seen by Reuters.
At the assembly, he instructed prosecutors what he knew of Bankman-Fried’s use of buyer funds to finance his business empire, the supply mentioned. Friedberg recounted conversations he had with different high executives on the topic and offered particulars of how Bankman-Fried’s hedge fund Alameda Research functioned, the supply mentioned.
Friedberg’s cooperation has not been beforehand reported. He has not been charged and has not been instructed he’s beneath prison investigation, the supply mentioned. Instead, he expects to be referred to as as a authorities witness in Bankman-Fried’s October trial, the individual mentioned.
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 spokesperson declined to remark.
Bankman-Fried is accused of diverting billions of {dollars} in FTX consumer 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.
Manhattan U.S. Attorney Damian Williams, who’s main the prison case towards now-bankrupt FTX, mentioned 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 govt, and Gary Wang, FTX’s former chief expertise officer, pleaded responsible to fraud and agreed to cooperate. A lawyer for Ellison did not reply to a request for remark. Wang’s lawyer declined to remark.
Meeting with prosecutors
FTX filed for chapter safety on Nov. 11. A number of days later, on Nov. 14, Friedberg acquired a name from two FBI brokers primarily based in New York. He instructed them he was prepared to share info however wanted to ask FTX to waive his attorney-client privilege, in response to an individual aware of the matter and emails seen by Reuters.
Friedberg wrote to FTX the following day asking the corporate to waive his privilege so he might cooperate with prosecutors, in response to the e-mail seen by Reuters. FTX didn’t accomplish that, however agreed with Friedberg on the factors he might open up to investigators, the individual mentioned.
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 U.S. Attorney’s Office arrange a gathering the place Friedberg signed so-called proffer letters ready for him by the SEC and different businesses, in response to the supply and an e-mail exchanged by members. Proffer letters sometimes 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 common counsel, additionally drew controversy resulting from a dishonest scandal involving a poker website it operated referred to as Ultimate Bet. A Canadian gaming fee in 2008 fined Ultimate Bet $1.5 million for failing to implement measures to stop fraudulent actions. Excapsa has since dissolved.
According to an audio recording accessible on the web site PokerNews, Friedberg and another Ultimate Bet associates privately mentioned that 12 months easy methods to deal with the scandal and decrease the quantity of refunds owed to gamers. Friedberg beforehand instructed 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 U.S. regulation agency Fenwick & West, the place he chaired its cost programs group, the supply aware of the matter mentioned. At the time, the supply mentioned Friedberg suggested Bankman-Fried on operating Alameda, which he based that 12 months.
In 2020, when Bankman-Fried launched a separate alternate for U.S. clients referred to as FTX.US, Friedberg moved in-house as FTX’s chief regulatory officer.
In a now-deleted weblog submit revealed that 12 months 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 Nov. 8, a day after Bankman-Fried disclosed to high executives that FTX was virtually out of cash, in response to the supply and three different individuals briefed on the talks, together with textual content messages his authorized crew exchanged on the time.
