The doomed cryptocurrency exchange FTX has sued the former executive Daniel Friedberg for paying hush money to some staff members to prevent them from speaking about the fraudulent nature of the exchange and many other wrongdoings.
In the lawsuit filed in the Bankruptcy Court for the District of Delaware on Tuesday, June 27, FTX Debtors alleged that during his time at the FTX Group, Daniel Friedberg advised SBF and his inner circle on legal and compliance matters and served as a “fixer tasked with, among other things, paying off whistleblowers who threatened to expose the true fraudulent nature of the FTX Group enterprise.”
FTX Seeks to Clawback what He Received
According to the lawsuit, Daniel Friedberg held important positions at SBF-controlled entities. He formally joined the exchange work group in January 2020 and served as the Chief Compliance Officer of the FTX US exchange and the General Counsel of Alameda Research.
He was in a position to have a deep insight into the FTX Group’s convoluted organizational structure and dubious business practices. Instead of correcting the situation or voicing concerns, he joined hands with Sam Bankman-Fried (SBF) in his wide-ranging con game.
He facilitated the routing of billions of dollars to “insiders, and their families, friends, and other acquaintances through purported personal loans, bonuses, investments, and all other means of transfer, including real estate purchases and hundreds of millions of dollars in charitable and political contributions.”
Per the complaint, During the early months of 2022, he paid exorbitant hush money to two staff members who threatened to blow the whistle about issues at the exchange. A female whistleblower received an undisclosed amount after her termination at the FTX US. It is important to note that instead of the exchange, Alameda settled with her. Friedberg also signed a 200,000-per-month for five years agreement with her attorney.
The second whistleblower, an attorney hired in December 2021, was terminated in less than three months. He received a redacted severance package upon his termination, even though he had worked at Alameda for less than three months. The lawsuit also alleges that Friedberg directed preparing bank account opening documents with false statements.
During his 22 months at the FTX US and Alameda, Friedberg was also purportedly given a $300,000 salary, a signing bonus of $1.4 million, 8% equity in FTX US, and cryptocurrencies worth tens of millions of dollars.
FTX debtors now seek to clawback all that Daniel Friedberg received and “recover damages caused by breaches of fiduciary duties, legal malpractice, and other wrongdoing, and to recover fraudulent transfers.”
Currently, the exchange restructuring team is recovering the misappropriated funds. Of the $8.7 billion misappropriated money, around $7 billion has been recovered. According to a Bloomberg report, the sale of the company $500 million stake in AI startup Anthropic has been put on hold despite multiple parties being interested in buying up the stake.
FTX pauses Anthropic sale. Wise move.
Selling losers first is crucial.
Anthropic tokenisation might also synergise well with FTX 2.0, as an exclusive listing. pic.twitter.com/WJd900JBYw
— FTX 2.0 Coalition (@AFTXcreditor) June 27, 2023