FTX’s former in-house lawyer Daniel Friedberg has helped US prosecutors in their investigation into the crypto firm’s demise, bolstering the government’s case against the founder Sam Bankman-Fried.
According to a source who spoke to Reuters, Friedberg discussed FTX at a meeting with two dozen investigators on November 22. During the conversation, he told authorities what he knew about Bankman-Fried’s exploitation of customer deposits to fuel his business empire. He also discussed the matter with other top executives and offered details about Bankman-Fried’s hedge fund Alameda Research.
Friedberg received a call from two FBI agents headquartered in New York on November 14, just a few days after FTX declared bankruptcy. He informed them that he was eager to disclose material but that he needed to request that FTX waive his attorney-client privilege.
According to the email obtained by Reuters, Friedberg wrote to FTX the next day, requesting that the company waive his privilege so that he could cooperate with prosecutors. The source said FTX did not do so, but agreed with Friedberg on the points he may give to investigators.
The meeting, which took place in the office of the United States Attorney for the Southern District of New York, includes representatives from the Justice Department, the Federal Bureau of Investigation, and the Securities and Exchange Commission.
According to the source, he has not been charged and has not been informed that he is the subject of a criminal investigation. Instead, he is expected to be called as a government witness in Bankman-Fried’s trial in October.
Bankman-Fried on Wednesday pleaded not guilty in federal court in New York on Tuesday to all eight counts of allegations of fraud, conspiracy, campaign finance law violations, and money laundering.
Friedberg advised a variety of banking, fintech, and online gambling organizations prior to working at FTX. He first represented Bankman-Fried as outside counsel in 2017 while at the US legal firm Fenwick & West, where he oversaw the payment systems group, according to a source familiar with the situation.
According to the source, Friedberg instructed Bankman-Fried on how to handle Alameda, which he created that year. He then moved in-house as FTX’s chief regulatory officer in 2020, when Bankman-Fried created a new exchange for US consumers called FTX.US.
Friedberg quit on November 8, a day after Bankman-Fried informed top executives that FTX was nearly out of money.
The ex-top lawyer joins the growing list of in-house executives at FTX working with the authorities to build the case against Bankman-Fried. Former Alameda CEO Caroline Ellison and former FTX CTO Zixiao (Gary) Wang both pled guilty to the charges of fraud and have reportedly been cooperating with the Southern District of New York and regulatory agencies.
According to court filings, FTX Bahamas co-CEO Ryan Salame informed the country’s security commission on November 9 that customer cash was being used to offset losses at Alameda, two days before the bankruptcy filing. This claim sparked the police inquiry that resulted in Bankman-Fried’s arrest by Bahamian authorities.
Salame is the first known FTX employee to have worked with authorities to assist bring the infamous crypto CEO down. Between 2019 and 2021, he worked for Alameda before joining FTX Digital Markets, the crypto exchange’s Bahamas business.
The court hearing Bankman-Fried’s case tentatively set the trial date as October 2, 2023, but said it may be moved “a day or so later or earlier.”
Information for this briefing was found via Reuters, Business Insider, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.