Crypto

FTX is suing a former lawyer for not stopping Bankman-Fried from committing fraud

The failed cryptocurrency exchange believes the lawyer could have done more to keep the company legitim

Failed cryptocurrency exchange FTX, trying to emerge from disgrace, has filed a lawsuit against its ex-lawyer, Daniel Friedberg, accusing him of aiding founder Sam Bankman-Fried and partners in committing online deception and deliberate non-compliance with risk mitigation measures. This legal action highlights the alleged failure to establish robust controls in one of the most prominent global cryptocurrency exchanges.

FTX crumbled and filed for insolvency in November, as its customer bank uncovered a glaring shortfall in both cash reserves and customer deposits. The subsequent month of December witnessed the Securities and Exchange Commission (SEC) accusing the firm of duping investors out of an astronomical sum exceeding $1.8 billion. Further aggravating matters, FTX was caught red-handed engaging in embezzlement and intertwining client funds with its sibling organization, Alameda Research, owned by none other than Sam Bankman-Fried.

In January 2020, Friedberg became a member of FTX, assuming the dual roles of chief compliance officer for FTX US and general counsel for the Alameda investigation. Curiously, this arrangement seemed to pose a conflict of interest. The official document revealed that Friedberg directly profited from FTX’s fraudulent activities, receiving over $3 million in cash in addition to the substantial salary he was already earning, which amounted to tens of millions.

According to the lawsuit, not only did Friedberg refrain from disclosing information, but he also actively assisted Bankman-Fried, along with other members of FTX, in carrying out deceitful transactions and fabricating misleading statements for bank accounts.

According to the lawsuit, Friedberg had the duty of implementing vital measures such as adequate internal controls, risk reduction and compliance within the company. However, he deliberately obstructed the progress of these controls and muzzled dissenting voices who were against the FTX project.

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