Daniel S. Friedberg, the disgraced UltimateBet and Absolute Poker attorney who has most recently served as the Chief Regulatory Officer and former General Counsel for failed cryptocurrency giant FTX, has reportedly turned on FTX’s co-founder and largest shareholder, Sam Bankman-Fried, and is cooperating with federal investigators in the criminal fraud case filed against Bankman-Fried in December.
According to Reuters, Friedberg shared details with as many as two dozen federal investigators in a November 22 meeting held at the U.S. Attorney for the Southern District of New York’s office in Manhattan. Besides SDNY officials, other investigators and attorneys from the Justice Department (DOJ), Federal Bureau of Investigation (FBI), and the U.S. Securities and Exchange Commission (SEC) also attended the meeting.
The Reuters update discloses that Friedman shared with investigators details of how Bankman-Fried is alleged to have used FTX and numerous related business entities to build his personal business empire through allegedly fraudulent and misrepresented transactions and disclosures. That included the FTX- controlled crypto hedge fund Alameda Research, which was built on air as a crypto investment vehicle, was exempted from FTX’s internal financial controls, and which plowed through at least $8 billion in customer deposits made into FTX and converted for Alameda use.
Bankman-Fried faces an October 2023 court date in connection with the fraud charges. He could face up to 115 years in prison if found guilty on all counts. Bankman-Fried is currently free on a $250 million bond after being extradited from the Bahamas last month.
Friedberg, according to the Reuters report, is expected to be called as a state’s witness during Bankman-Fried’s October trial. The Reuters report also declares that Friedberg himself has not been charged in connection with FTX’s collapse, and he has not been told whether he is also under criminal investigation connected to FTX’s multi-billion-dollar failure. Reuters credited an unnamed source familiar with the late-November discussion.
Friedberg’s online-poker past continues to re-emerge
Friedberg’s shadowy history in online poker included terms of service at both UltimateBet and Absolute Poker, after it acquired UB, in the 2000’s and early 2010’s. Though Friedberg was involved in numerous corporate subterfuges designed to shield the nature of UB’s and AP’s true ownership structures, his biggest claim to poker infamy was when he was taped proposing to cover up the UltimateBet insider-cheating scandal on a recording secretly made by primary UB cheater Russ Hamilton.
Following 2011’s “Black Friday,” when the largest US-facing offshore online-poker sites had their internet domains seized, and were forced to exit the American market while a handful of executives and third-party payment processors faced charges, Friedberg and other corporate attorneys from the UB/AP nexus drifted into other practices. Many eventually re-emerged in the crypto industry when Bitcoin and other such virtual currencies created a new market.
Between his online-poker and crypto careers, Friedberg also opened a boutique law practice in Seattle, where he handled some of the going-out-of-business matters related to Absolute Poker’s dissolution and disposal of assets. Friedberg himself acquired and kept control of numerous trademarks and brand registrations associated with Absolute Poker and UB.com, the renamed UltimateBet site.
Whether Friedberg later sold the UB.com domain or just allowed it to lapse isn’t clear from publicly available records, but a few years after AP closed shop, UB.com ended up in the control of — you guessed it — a crypto startup, United Bitcoin. That crypto coin still exists in a technical sense though the company behind it hasn’t posted on social media since 2018, and the ub.com domain itself no longer resolves. It’s part of the strange history for the “ub.com” domain, which was the 19th internet domain ever registered when it was secured by a defunct computer firm, Ungermann-Bass, back in 1986.
Coingeek feature bashes Friedberg, raises other Black Friday connections
A recent Coingeek feature by contributing writer Steven Stradbrooke loudly wondered why Friedberg hadn’t already been indicted by the feds for his presumptive role in FTX’s collapse, though the Reuters update answers at least some of those questions.
Stradbrooke himself is no stranger to online poker and some of its darker tales. Before moving to Coindesk, he was a veteran contributor to the controversial but informative CalvinAyre.com, and he often focused on crypto news when that site pivoted to crypto concerns.
Stradbrooke’s latest effort on FTX, Bankman-Fried, and Friedberg highlights a few of the parallels between FTX’s collapse and online poker’s Black Friday, with Friedberg as the common denominator. For instance, in the recently published SEC complaint against Bankman-Fried, he is alleged to have orchestrated the creation of a “front” investment domain and a company called North Dimension Inc., through which Bankman-Fried encouraged certain well-heeled investors to deposit into FTX and Alameda.
North Dimension, though, claimed to be a U.S.-based electronics retailer, with no published connection to FTX or Alameda other than an identical physical address to one of FTX’s that was buried in the fine print. Funds deposited through North Dimension went into Alameda’s coffers, while customer accounts on FTX were credited in parallel though no funds were actually transferred to FTX. The scheme was allegedly created to evade possible U.S. oversight concerning unregistered securities.
Stradbrooke drew a parallel to one of the Black Friday case disclosures, regarding the use of fake web sites purportedly selling golf equipment and jewelry for products and disguising the description of online transfers made to some of the poker sites. Stradbrooke then drew another parallel between FTX’s investment in a small US bank via its stake in FBH Corp., a Bahamas-based entity cozy to Bankman-Fried and FTX. The Coingeek contributor compared it to the infamous SunFirst Bank episode connected to online poker’s Black Friday, when illicit online-poker deposits and withdrawals helped prop up a failing southern Utah bank.
Stradbrooke wrote, “Friedberg—who would have been all too aware of the SunFirst gambit—may well have been in a prime position to suggest alternative methods of ensuring customers could continue to funnel fresh deposits to FTX,” thus explaining the North Dimension website subterfuge. Friedberg surely knew of the SunFirst affair after the fact, but Absolute Poker and UltimateBet largely used other deposit/withdrawal methods, including some in Canada. The SunFirst escapade was created in conjunction with and funded by one of AP’s bigger rivals, Full Tilt Poker.
More details are likely to emerge regarding Friedberg’s role within FTX. However, as the Reuters piece indicates, he might well slide away from the FTX mess with no formal repercussions, as he did from the Absolute Poker and UltimateBet scandals and collapse.