FTX Sues SBF's 'Fixer' Dan Friedberg, Claims The Ex-CCO Paid 'Hush Money' To Whistleblowers

FTX, the cryptocurrency empire that imploded last November, has filed a lawsuit against its former chief compliance officer and Alameda Research's general counsel over allegations of assisting the company founder in committing fraud and paying employees "hush money."

In a complaint filed in the U.S. Bankruptcy Court in Delaware, the current admin of FTX alleged that Daniel Friedberg, who has ties to the UltimateBet online poker scandal, aided Sam Bankman-Fried, the co-founder and CEO of FTX, in "wholesale raiding of customer exchange deposits."

The UltimateBet online poker scandal happened in 2007 when members of Absolute Poker levied accusations of cheating in numerous Internet forums, and a year after, UltimateBet confirmed that cheating had gone on for over a year.

The complaint also accused Friedberg of serving as Bankman-Fried's personal "fixer," who allegedly "whitewashed" employees' complaints concerning FTX and Alameda Research's activities of settling claims.

"With regard to multiple whistleblower complaints alleging corporate malfeasance, Friedberg served as Bankman-Fried's fixer," the complaint read.

"He not only settled the complaints for inflated amounts, in some instances he arranged for the FTX Group to retain the whistleblowers' attorneys post-settlement, thereby buying or otherwise ensuring their silence," it added.

Moreover, the lawsuit alleges Friedberg of legal malpractice and breach of fiduciary duty and intends to claw back "millions" in cryptocurrency the FTX former CCO received while working for the crypto exchange platform aside from his compensation and around $3 million in bonuses.

FTX officials alleged in the bankruptcy court filing that Friedberg "personally received millions of dollars in unjustified bonuses and other compensation" and was handsomely "rewarded for his 22 months of service at Alameda and the FTX US exchange," which included "cryptocurrency worth tens of millions of dollars, as well as handsome monetary compensation and a bonus in excess of $3 million."

Prior to the court filing, FTX CEO John J. Ray III released a report Monday, detailing the staggering lapses by the former management team in handling customers' funds.

The report alleged that an unnamed senior attorney and Bankman-Fried lied to the banks about the real purpose of a "shell company" that was used to receive client deposits and made "sham" documents to trick auditors.

While Ray III's report did not reveal the name of the senior attorney, the Wall Street Journal revealed that it is Friedberg, citing people familiar with the matter.

Friedberg served as Bankman-Fried's adviser as well as to the companies he ran while working at Fenwick & West law firm. He eventually became an in-house attorney at both FTX and the bankrupt crypto hedge fund Alameda Research in 2020.

Friedberg also held top compliance roles at the crypto exchange platform while serving as the general counsel of Alameda Research.