(Bloomberg) — He was the final crypto cleaner – a attorney, fixer and a lot more for Sam Bankman-Fried and his FTX organization empire.
Daniel Friedberg, FTX’s former main regulatory officer, now is getting pulled even deeper into the intrigue surrounding his former boss Bankman-Fried, who’s hurtling toward a person of the most significant white-collar legal trials in US background. In a lawsuit filed very last week, the new management of FTX accused Friedberg of enabling Bankman-Fried’s alleged crimes, and encouraging to orchestrate a “wide-ranging con game” to raid billions of buyer bucks.
Legal documents, monitor photographs of messages involving Friedberg viewed by Bloomberg Information, and interviews with much more than a 50 % dozen of his previous colleagues — who spoke on the condition of anonymity simply because of the ongoing FTX legal proceedings — paint a portrait of a person whose complex role at the crypto conglomerate extended nicely outside of dispensing lawful suggestions.
Friedberg, who isn’t amongst those people billed in the FTX situation, remains 1 of the couple of men and women from Bankman-Fried’s interior circle who has not entered a cooperation agreement with prosecutors. 3 previous executives have pleaded responsible to fraud, agreed to cooperate with the govt and give proof against Bankman-Fried, in exchange for the likelihood of lighter sentences.
A individual who answered Friedberg’s cell phone declined to converse to Bloomberg and Friedberg didn’t respond to a listing of inquiries despatched via e mail and textual content. A spokesman for Bankman-Fried declined to comment.
Like Michael Clayton, George Clooney’s titular box-business character, Friedberg cleaned up messes and manufactured complications disappear, in accordance to the lawsuit. He minimize bargains and smooth-talked doubters. At the very least two times, he silenced whistleblowers, the accommodate alleges, including that he created hundreds of thousands for himself in the system.
Bankman-Fried counted Friedberg, who turns 53 this month, among his closest confidants, according to people today who labored with the two guys. The younger crypto mogul’s father, Joe Bankman, inspired his son to employ the service of Friedberg, who experienced been working carefully with FTX and affiliated organizations at outdoors counsel Fenwick & West. Friedberg joined Bankman-Fried’s crypto organization in 2020, turning into a person of his major boosters.
‘Great Task Sam!’
Bankman-Fried is accused by prosecutors of misappropriating billions in shopper funds to fuel large-risk trades, investments, political donations and authentic estate. He pleaded not guilty to legal fees of conspiracy and fraud. The 31-12 months-previous is thanks to experience trial in October.
Ahead of his downfall, Bankman-Fried fashioned himself as an approachable encounter of the crypto industry — including on Capitol Hill, the place he testified in 2021 about the security and trustworthiness of FTX.
“Great task Sam!” Friedberg wrote of Bankman-Fried’s testimony, according to messages observed by Bloomberg News. “Somehow you averted even expressing the place you lived now!”
A colleague in that chat suggested Bankman-Fried make comparable appearances far more frequently.
“Lol,” Friedberg wrote back again. “We dodged a minefield, let us not make it a practice.”
The up coming year, when crypto marketplaces turned south and FTX employees were starting to be nervous about delays to reward payments, Friedberg advised a deal with: “I’d recommend we fork out out all bonuses considerably less than $100k asap,” he wrote in a concept obtained by Bloomberg News. “Management can wait around.”
Friedberg acquired tens of millions in fewer than two a long time at FTX and its affiliated firms, the lawsuit claims. He gained a far more than $3 million money reward in 2021, on top of a $300,000 yearly salary, a $1.4 million signing bonus and an 8% equity stake in FTX US. He held $33.7 million truly worth of the digital token Serum — also attained by means of FTX — at the time the exchange declared individual bankruptcy in November, according to the FTX lawsuit submitted past 7 days.
When FTX’s trading affiliate Alameda Investigation invested $11.5 million in small Washington-based Moonstone Lender, Friedberg helped broker the deal, in accordance to two individuals familiar with the matter. Headquartered in the exact same condition in which Friedberg labored, Moonstone Financial institution gave Bankman-Fried’s corporation a foothold in the US financial system.
According to FTX’s lawsuit versus Friedberg, he also set up a individual shell organization. The new management of the company explained he “directed the formation” of North Dimension, which FTX could use to tackle a key difficulty: banking companies usually didn’t want to operate with crypto businesses. Through the North Dimension shell, FTX could maneuver additional very easily. FTX eventually channeled tens of tens of millions of bucks of client resources via North Dimension’s accounts for higher-chance trades, political donations, loans to its executives and extra, the match alleged.
Bahamas and Miami
A prime priority for Friedberg was laying the foundation for FTX to work in the US and the Bahamas, according to people today common with his role and descriptions of his functions in courtroom paperwork.
At a time when regulators had been skeptical of offshore crypto firms circumventing US banking regulations, Bankman-Fried moved his FTX conglomerate from Hong Kong to the Bahamas.
In July 2021, an FTX lawyer made available a previous Bahamian governing administration formal a $1 million reward to protected a license for FTX in 10 months — a undertaking that was accomplished in 6 — in accordance to court information submitted in FTX’s individual bankruptcy case. A man or woman acquainted with the make any difference explained that Friedberg was the FTX law firm and Allyson Maynard-Gibson, the ex-Bahamas’ lawyer typical, was the government official.
Maynard-Gibson, who has not been accused of wrongdoing, didn’t reply to a request for comment.
Back again in the US, Friedberg worked to pump up FTX’s PR offensive. He assisted persuade officers in Florida to modify the title of the NBA’s Miami Heat dwelling stadium to the FTX Arena, in a $135 million deal.
“Sam is a exceptional man,” Friedberg informed area officers in a meeting. “His task just about every day is to try to make as a great deal cash as he can for charity.”
“He cares most about compliance and accomplishing the right thing,” Friedberg additional.
Far more not long ago, Friedberg distanced himself from the offer. Documents submitted in federal court docket in Florida showed he offered to assistance attorneys performing on a class-action lawsuit in opposition to FTX that hinges on its athletics and celebrity endorsements, together with with Tom Brady and Gisele Bundchen. He’s stated a junior FTX colleague dreamed up the Miami stadium offer, according to his sworn assertion filed in the course motion situation.
Like most fantastic legal professionals, Friedberg could engage in difficult at instances. In 2022, when a new attorney for Alameda grew to become anxious about how the investing arm was handling dollars, Friedberg fired him, in accordance to the lawsuit and a report from FTX’s new management.
David Mastrianni and Hussein Faraj, two people who did business with FTX and Alameda, explained in interviews that Friedberg sought to bargain with them in return for keeping peaceful immediately after they accused the providers of orchestrating pump-and-dump strategies.
By the time FTX formally submitted for individual bankruptcy, Friedberg had stop.
Because then, he’s been fast to present his version of events to federal prosecutors. He was amongst the first to communicate with authorities about what occurred at FTX, according to two people today familiar with the issue. Prosecutors have not discovered no matter whether Friedberg will be referred to as as a witness.
In some techniques, Dan Friedberg appeared reduce out for a work at FTX, avatar of the crypto growth and bust. He spent portion of his career as basic counsel at an additional position wherever dreamers and gamblers gather: the dad or mum organization of Greatest Bet, a poker internet site.
Ultimate Wager ran into problems when it became embroiled in a cheating scandal in excess of conduct that took place involving 2003 and 2007.
Application at the web page provided a mystery “God Mode” that enabled select players to glimpse at their opponents’ playing cards. Subsequent an ownership improve, the mother or father corporation was fined $1.5 million and refunded far more than $22 million to the gamers who’d been cheated.
Subsequent the collapse of FTX, a participant in a December 2022 Twitter Spaces event requested Bankman-Fried why he’d employed Friedberg, given the attorney’s relationship to the poker web page.
“Dan was of course just one of the people today who experienced been working for FTX for a even though,” Bankman-Fried replied. “Our authorized and regulatory staff had an enormous endeavor in entrance of them. We were searching to get accredited and controlled in dozens of jurisdictions at as soon as,” he reported.
“That was an unbelievably substantial endeavor, which I feel took up most of the time of most of our lawful and compliance departments. And in retrospect I think almost certainly took up much too much time.”
–With support from Ben Bain.
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