FTX accuses ex-executive of using 'hush money' to silence whistleblower

Author: JESSE COGHLAN, COINTELEGRAPH; Compiler: Songxue, Jinse Finance

FTX has filed a lawsuit against a former head of regulation and compliance at the exchange, alleging he made a series of payments in an attempt to prevent employees from reporting problems at the exchange.

On June 27, FTX filed a lawsuit against Daniel Friedberg, who served in multiple roles as FTX Chief Regulatory Officer, FTX US Chief Compliance Officer, and Alameda Research General Counsel.

FTX claimed that Friedberg was a “middleman” for the exchange’s co-founder Sam Bankman-Fried — according to the complaint, Sam Bankman-Fried’s father urged Friedberg to be given a significant role:

"Sam Bankman-Fried's father, Joe Bankman, urges Sam Bankman-Fried and others to put Friedberg at the center and to keep Friedberg 'informed ... so that we only have one man in charge.'"

Friedberg allegedly paid “hush money” to two potential whistleblowers to keep them from leaking information about “regulatory issues” and the allegedly close relationship between FTX and Alameda.

In one alleged incident, Friedberg paid a whistleblower "to bribe or otherwise ensure their silence," and hired an attorney for the whistleblower, the suit says.

In the 40-page document, FTX filed 11 civil charges, including accusing Friedberg of violating its legal duties and authorizing a series of fraudulent transfers and “loans” to other former FTX executives.

According to the lawsuit, Friedberg received a $300,000 salary, a $1.4 million signing bonus, an additional $3 million in cash bonuses, an 8 percent stake in FTX US, and “financial assets worth tens of millions of dollars” during his 22-month tenure at the exchange. ” — FTX is looking to cover all of these losses.

Portions of the complaint, particularly those related to whistleblower compensation, have been redacted.

An example of the redacted portion of the lawsuit about one of the whistleblowers. Source: Kroll

In one incident in March 2022, Friedberg offered an “extraordinary settlement” to a female FTX U.S. employee named “Whistleblower-1” who worked for the U.S. exchange for “less than two month" with a salary of $200,000.

FTX also claims that after the settlement, he initiated a $12 million deal to hire Whistleblower-1’s attorney.

According to the suit: The settlement was in response to a demand letter from Whistleblower-1, which claimed that “Alameda was nothing more than an extension of FTX and was used to increase investor confidence in the FTX project, thereby driving up the rate of development or investment in FTX.” item price".

FTX redacted the amount paid to whistleblower -1. Source: Kroll

The ex-employee also claimed that "details about the company's fundraising and various projects were publicly disclosed on Slack," which they claim allowed "all employees present to trade based on this information before it was publicly announced."

After the settlement, Friedberg contacted the law firm on behalf of "Whistleblower 1" and entered into an agreement in which the firm offered "5 More than $200,000 per month during the year” was hired.

In another case, Friedberg reportedly fired a lawyer who worked for Alameda, dubbed "Whistleblower-2," because they "began to worry about governance and regulatory issues within the company."

FTX alleges that the individual had been with Alameda for less than three months, yet they still received severance, which was amended in the filing.

A June 26 report by FTX’s head of restructuring John Ray said an unnamed senior attorney “facilitated and concealed” the commingling of client funds.

On the same day, the Wall Street Journal, citing people familiar with the matter, identified the unnamed lawyer as Daniel Friedberg.

Friedberg was also named as providing information to U.S. Attorney's Office investigators.

In addition, a class action lawsuit against celebrities allegedly promoting FTX also pointed out that the evidence presented by Friedberg may disprove some of the defendants' key defenses.