Exclusive: FTX’s former top lawyer aided U.S. authorities in Bankman-Fried case

Jan 5 (Reuters) – FTX’s previous prime attorney Daniel Friedberg has cooperated with U.S. prosecutors as they examine the crypto firm’s collapse, a source familiar with the make a difference explained, introducing strain on founder Sam Bankman-Fried who was arrested on legal fraud rates last thirty day period.

Numerous other former FTX executives have also engaged counsel to discuss their cooperation with prosecutors, two individual resources said.

Friedberg gave particulars about FTX in a Nov. 22 conference with two dozen investigators, the man or woman reported. The meeting, held at the U.S. Legal professional for the Southern District of New York’s workplace included officials from the Justice Office, Federal Bureau of Investigation, and the U.S. Securities and Trade Commission, the source claimed. E-mail among attendees scheduling the conference with individuals organizations had been noticed by Reuters.

At the conference, he told prosecutors what he realized of Bankman-Fried’s use of purchaser funds to finance his enterprise empire, the source stated. Friedberg recounted discussions he experienced with other leading executives on the subject matter and delivered specifics of how Bankman-Fried’s hedge fund Alameda Investigate functioned, the resource stated.

Friedberg’s cooperation has not been formerly reported. He has not been charged and has not been instructed he is beneath prison investigation, the source claimed. Instead, he expects to be termed as a federal government witness in Bankman-Fried’s Oct trial, the man or woman said.

Friedberg’s lawyer, Telemachus Kasulis, and FTX did not answer to requests for remark on his cooperation. The SEC, the Division of Justice, the FBI, and Bankman-Fried’s spokesman declined to remark.

Bankman-Fried is accused of diverting billions of pounds in FTX consumer funds to Alameda to bankroll venture investments, luxury real estate purchases, and political donations. On Tuesday, he pleaded not guilty in Manhattan federal courtroom.

Manhattan U.S. Legal professional Damian Williams, who is foremost the criminal case against now bankrupt FTX, mentioned past month: “If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it.”

Two of Bankman-Fried’s closest associates, Caroline Ellison, Alameda’s former main govt, and Gary Wang, FTX’s previous main technology officer, have now pleaded guilty to fraud and agreed to cooperate. A lawyer for Ellison did not respond to a request for remark. Wang’s attorney declined to remark.

Other previous FTX executives are remaining represented by two attorneys at U.S. organization Steptoe & Johnson, Michelle Levin and Jason Weinstein, who are engaged in conversations with the U.S. Attorney’s Office about their prospective cooperation, according to two persons familiar with the talks, which have not been earlier described.

A Steptoe spokesperson did not respond to a ask for to comment.

Assembly WITH PROSECUTORS

FTX submitted for individual bankruptcy safety on Nov. 11.

A number of times afterwards, on Nov. 14, Friedberg gained a simply call from two FBI agents primarily based in New York. He explained to them he was eager to share information and facts but essential to check with FTX to waive his attorney-shopper privilege, in accordance to a man or woman common with the issue and emails considered by Reuters.

Friedberg wrote to FTX the next day inquiring the company to waive his privilege so he could cooperate with prosecutors, according to the email seen by Reuters. FTX did not do so, but agreed with Friedberg on the details he could disclose to investigators, the person stated.

Friedberg then wrote again to the two FBI agents, telling them in an e-mail reviewed by Reuters: “I want to cooperate in all respects.”

The U.S. Attorney’s Office environment set up a assembly where Friedberg signed so-referred to as proffer letters prepared for him by the SEC and other organizations, according to the resource and an e mail exchanged by contributors. Proffer letters normally describe a possible arrangement among authorities and persons who are witnesses or topics of an investigation.

“By means of THICK AND Slender”

Prior to his get the job done advising FTX, Friedberg recommended a combine of banking, fintech, and on line gaming corporations.

A person of his past companies, a Canadian on line gaming business named Excapsa Application, where he was standard counsel, also drew controversy thanks to a cheating scandal involving a poker web-site it operated named Supreme Bet. A Canadian gaming commission in 2008 fined Supreme Wager $1.5 million for failing to implement steps to prevent fraudulent functions. Excapsa has given that dissolved.

According to an audio recording readily available on the site PokerNews, Friedberg and some other Final Guess associates privately reviewed that year how to manage the scandal and lessen the total of refunds owed to players. Friedberg beforehand advised NBC News that the audio was illegally recorded but NBC’s post did not say that Friedberg challenged its authenticity.

Friedberg 1st represented Bankman-Fried in 2017 as outdoors counsel although at U.S. law firm Fenwick & West, the place he chaired its payment methods group, the source acquainted with the subject stated. At the time, the resource mentioned Friedberg encouraged Bankman-Fried on functioning Alameda, which he launched that year.

In 2020, when Bankman-Fried released a independent trade for U.S. clients termed FTX.US, Friedberg moved in-property as FTX’s main regulatory officer.

In a now-deleted weblog article printed that yr on FTX’s site, Bankman-Fried wrote that Friedberg was FTX’s legal advisor “from the incredibly beginning,” noting he experienced been “with us as a result of thick and thin.”

Friedberg resigned from his position on Nov. 8, a day immediately after Bankman-Fried disclosed to best executives that FTX was almost out of money, according to the resource and a few other individuals briefed on the talks, alongside with textual content messages his authorized workforce exchanged at the time.

Further reporting by Hannah Lang editing by Megan Davies and Anna Driver

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