By Angus Berwick
(Reuters) – Daniel Friedberg, FTX’s former top lawyer, has been working with US prosecutors in the investigation into the crypto firm’s collapse, a source familiar with the matter said, increasing pressure on founder Sam Bankman-Fried, the latter month was arrested for criminal fraud.
Friedberg provided details of FTX at a meeting with two dozen investigators Nov. 22, the person said. The meeting, held at the US Attorney’s Office for the Southern District of New York, was attended by officials from the Justice Department, the Federal Bureau of Investigation and the US Securities and Exchange Commission, the source said. Emails between participants scheduling the meeting with these agencies were viewed by Reuters.
At the meeting, he told prosecutors what he knew about Bankman-Fried’s use of client money to fund his business empire, the source said. Friedberg recounted conversations he’d had with other top executives on the subject and provided details of how Bankman-Fried’s hedge fund Alameda Research worked, the source said.
Friedberg’s collaboration has not been reported so far. He has not been charged and has not been told he is under criminal investigation, the source said. Instead, he expects to be called as a government witness in the October Bankman-Fried trial, the person said.
Friedberg’s attorney, Telemachus Kasulis, the FBI, and FTX did not respond to requests for comment about his collaboration. The SEC, the Justice Department and Bankman-Fried’s spokesman all declined to comment.
Bankman-Fried is accused of diverting billions of dollars in FTX client funds to Alameda to fund venture investing, luxury home purchases and political donations. He pleaded not guilty in federal court in Manhattan on Tuesday.
Manhattan US Attorney Damian Williams, who is leading the criminal case against now-bankrupt FTX, said last month, “If you were involved in wrongdoing at FTX or Alameda, now is the time to step forward.”
Two of Bankman-Fried’s closest associates, Caroline Ellison, former CEO of Alameda, and Gary Wang, former chief technology officer of FTX, pleaded guilty to fraud and agreed to cooperate. An attorney 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 FBI agents in New York. He told them he was ready to share information but would have to ask FTX to waive his attorney-client privilege, according to a person familiar with the matter and emails viewed by Reuters.
According to the Reuters email, Friedberg wrote to FTX the next day asking the company to waive his privilege so he could work with prosecutors. FTX did not do so, but agreed with Friedberg on the points he could disclose to investigators, the person said.
Friedberg then wrote back to the two FBI agents, telling them in an email verified by Reuters: “I want to work together in every way.”
The U.S. Attorney’s Office organized a meeting where Friedberg signed proffer letters prepared for him by the SEC and other agencies, according to the source and an email shared by attendees. Offer letters typically describe a potential agreement between government agencies and individuals who are witnesses or the subject of an investigation.
“THROUGH THICK AND THIN”
Prior to advising FTX, Friedberg advised a mix of banking, fintech and online gaming companies.
One of his previous employers, a Canadian online gaming company called Excapsa Software, where he was general counsel, also caused controversy over a cheating scandal involving a poker site he ran called Ultimate Bet. A Canadian Gambling Commission fined Ultimate Bet $1.5 million in 2008 for failing to enforce measures to prevent fraudulent activity. Excapsa has since disbanded.
According to an audio recording available on the PokerNews website, Friedberg and several other Ultimate Bet employees discussed privately earlier this year how to deal with the scandal and minimize the amount of refunds owed to players. Friedberg previously told NBC News that the audio was recorded illegally, but NBC’s article did not say that Friedberg questioned its authenticity.
Friedberg first represented Bankman-Fried as an outside counsel in 2017 while he was with US law firm Fenwick & West, where he led their payment systems group, the source familiar with the matter said. At the time, the source said Friedberg was advising Bankman-Fried on running Alameda, which he founded that year.
When Bankman-Fried launched a separate exchange for US clients called FTX.US in 2020, Friedberg moved on as FTX’s Chief Regulatory Officer.
In a blog post, now deleted, published on FTX’s website that year, Bankman-Fried wrote that Friedberg had been FTX’s legal counsel “from the beginning,” noting that he’s “been with us through thick and thin ” be.
Friedberg resigned from his position on Nov. 8, a day after Bankman-Fried top executives said FTX was almost out of funds, according to the source and three other people briefed on the talks, along with text messages, which his legal team exchanged at the time.
(Additional reporting by Hannah Lang; Editing by Megan Davies and Anna Driver)
Source: Crypto News Deutsch