A recent report by the Wall Street Journal on the collapse and fallout from cryptocurrency concern FTX offers renewed interest in the role played by former online-poker attorney Daniel Friedberg in helping FTX and its founder, Sam Bankman-Fried, evade financial regulations around the globe in building the giant crypto exchange.
A second interim report released on Monday by FTX's stand-in CEO, John J. Ray III, identifies a "senior FTX Group attorney (Attorney-1)" who directly aided Bankman-Fried and other FTX execs in ongoing subterfuge dating all the way back to FTX's inception.
Ray's report declares, "The FTX Senior Executives did not commingle and misuse customer deposits by accident. Commingling and misuse occurred at their direction, and by their design. Bankman-Fried, with the assistance of a senior FTX Group attorney (“Attorney-1”) and others, lied to banks and auditors, executed false documents, and moved the FTX Group from jurisdiction to jurisdiction, taking flight from the United States to Hong Kong to the Bahamas, in a continual effort to enable and avoid detection of their wrongdoing. In doing so, they showed little of the concern for customers that they publicly professed."
The Wall Street Journal has subsequently reported that "Attorney-1", according to its sources, is Friedberg (photo at right), who held the role of Chief Regulatory Officer at FTX after earlier being the company's general counsel.
Deeper role for 'Attorney-1' than initially reported
As Ray's latest report details, "Attorney-1" (Friedberg) played more than just a casual role in FTX's deception. Fully six pages of the 36-page report, made in connection with FTX's bankruptcy filings, details Attorney-1's alleged misdeeds. "A senior FTX Group attorney, Attorney-1, actively facilitated and covered up the FTX Group’s commingling of customer and corporate funds. Attorney-1 caused and allowed false information to be conveyed to customers, banks, auditors, investors, and other third parties, including as set forth in the following examples...."
Veteran gambling writer Alex Weldon of Bonus.com summarized illicit activities specifically attributed to Attorney-1 as follows:
- Advising FTX leaders on their alleged deception and directing employees to lie to financial institutions and auditors,
- Creating fake contracts between the companies Bankman-Fried controlled to justify the movement of funds,
- Assisting FTX leaders in relocating the company to the Bahamas to avoid regulation in Hong Kong (despite the company’s public pro-regulation posturing),
- Creating and backdating bogus contracts between the various companies controlled by Bankman-Fried and FTX to justify the money moving between them,
- Helping to incorporate North Dimension and falsely portray it as an operational cryptocurrency trading business,
- Firing a junior attorney who noticed suspicious activity and raised those concerns.
Weldon's summation is a restructuring of three sections of Ray's report discussing Attorney-1, which are presented by Ray as "making false statements to a US bank", "retaliation against an employee" (a junior attorney who was fired) "who raised concerns about commingling [investor funds]", and the "creation of sham payment agent agreement(s)" that "purported to legitimize" various FTX transfers and deposits.
Friedberg's online-poker black history
As reported here at PokerOrg last November, Friedberg's dark schemes behind online-poker's curtains date back to his years as a corporate attorney for UltimateBet parent entity Excapsa. Friedberg was caught on tape in a discussion with primary inside cheater Russ Hamilton and other UB executives professing that he hoped the company could find a way to refund millions of dollars less than what Hamilton and other cheaters had stolen from players at UltimateBet's tables.
Friedberg came to Excapsa via his position as Phil Hellmuth's personal attorney 20 years ago, whenn Hellmuth was the second poker player to invest in Excapsa founder Greg Pierson's vision for an online-poker site. Friedberg soon parlayed that relationship into a role with Excapsa itself, and later, when the company was sold to Absolute Poker, he continued working with the combined AP entity.
Friedberg reported to have turned state's evidence in federal FTX probe
One complicating factor amid the most recent revelations is that Friedberg reportedly flipped on Bankman-Fried and other FTX executives when the company collapsed last November. Friedberg reportedly met with as many as two dozen investigators from several prominent agencies as they began investigating the widespread fraud within FTX and its associated business entities.
While Friedberg likely negotiated a deal in exchange for cooperation, such a deal could have limits. If federal investigators were to determine the Friedberg lied or substantially omitted information relevant informarion, such a plea deal with US feds could be rendered null and void.
