FTX Sues Former Lawyer Over Involvement In Aiding Bankman-Fried's Fraud, Suppressing Whistleblowers

FTX claims that Friedberg concealed complaints from employees who raised concerns about FTX and Alameda's activities

FTX filed for bankruptcy in November 2022 due to a depletion of customer deposits.

Source : Getty

FTX, the bankrupt cryptocurrency exchange, has filed a lawsuit against its former top lawyer, alleging his involvement in aiding fraud committed by company founder Sam Bankman-Fried and suppressing whistleblowers who reported misconduct within the company, as reported by Reuters. The complaint was submitted to the US Bankruptcy Court in Delaware on Tuesday. It characterises Daniel Friedberg, the former chief compliance officer at FTX and general counsel of the affiliated crypto hedge fund Alameda Research, as a "fixer" who facilitated the misappropriation of customer funds by Bankman-Fried and other FTX executives.

FTX claims that Friedberg concealed complaints from employees who raised concerns about FTX and Alameda's activities by settling claims for excessive amounts and even engaging law firms that represented whistleblowers to provide legal services for FTX. The specific settlement figures are redacted in the complaint.

The lawsuit accuses Friedberg of legal malpractice and breaching his fiduciary duty. It aims to recover "tens of millions" worth of cryptocurrency that Friedberg received during his tenure at FTX, in addition to his compensation and $3 million in bonuses.

FTX filed for bankruptcy in November 2022 due to a depletion of customer deposits. The new leadership of the company has accused Bankman-Fried and his associates of widespread failures in implementing corporate controls.

Bankman-Fried faces criminal charges in federal court in Manhattan, where he is accused of diverting billions of dollars from FTX customer funds to cover losses at the Alameda hedge fund and fund speculative investments. Bankman-Fried maintains his innocence and denies any misappropriation of funds.

Several other FTX executives have pleaded guilty to charges brought against them in the United States.

Friedberg has reportedly cooperated with US investigations into the collapse of FTX, according to Reuters.

Before joining FTX and Alameda in 2020, Friedberg served as an adviser to Bankman-Fried and his companies while employed at law firm Fenwick & West.

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