Numerous well-known pros have been impacted by the crash and dissolvancy of leading cryptocurrency exchange FTX, which filed for bankruptcy on Friday after its billions of dollars of debt were exposed and a week-long search for white-knight investors came up empty. Poker players as a whole have always assumed greater risk than most and have had a natural affinity for the crypto market over the last decade, though the FTX situation has served as a stark reminder of that risk.
On Thursday, Poker.org published a lookback at one of FTX's leading officials, Daniel S. Friedberg, and his links to one of online poker's darkest chapters. Friedberg, a former UltimateBet and Absolute Poker corporate attorney, actively tried to cover up the damages of the Russ Hamilton-led insider cheating. He resurfaced in recent years in a pivotal role at FTX, first as the company's general counsel, and more recently as its chief regulatory officer.
Though the company's inner workings won't be unraveled for months, if ever, Friedberg would almost certainly have served an important legal and functional role in finding ways to make FTX's services and structure appear legitimate in the eyes of financial regulators around the globe. FTX's primary licensing was obtained in Antigua and Barbuda, a long-time haven for "offshore" online-gambling services seeking little or no true oversight, and also where the licensing of crypto services has opened a new revenue stream for the small Caribbean nation in recent years.
The poker world's discovery that Friedberg was involved with FTX may have been well known within inner crypto circles, but it was much less an item inside poker... until last week. A few pros were on to Friedman months ago, such as Cliff "JohnnyBax" Josephy, who asked in May, "Anyone know if FTX Regulatory Officer is the same Dan Friedberg who was an attorney at Ultimate Bet during its cheating scandal? If so, surprising that tidbit was omitted from his bio."
Friedberg's past history within online poker, as Josephy realize, found no mention within his FTX bio. Meanwhile, all of the bios of top FTX executives, including Friedberg, were scrubbed from FTX's site on Friday in conjunction with its bankruptcy filings.
While Josephy figured out the connection between FTX's Friedberg and online poker's largest scandals early on, other well known pros might not have been as lucky. Take veteran pro Joseph "subiime" Cheong, for instance, who had this to say when he learned of Friedberg's involvement at FTX:
High-stakes poker legend Tom Dwan close to FTX boss Bankman-Fried
Perhaps no famed poker pro has had a closer relationship to FTX and its founder, Sam Bankman-Fried, than Tom Dwan. Dwan became friends with Bankman-Fried and at least acquaintances with a few other FTX executives at some point. Last year, he appeared alongside Bankman-Fried in a 40-minute give-and-take on FTX's YouTube channel, where the two discussed both the similarities and differences between poker and cryptocurrency investing.
Yet Dwan seemed to be as stunned by the revelations regarding Friedman being FTX's top legal advisor as anyone. With the "no one" referring to his contacts at FTX, Dwan tweeted this last Wednesday:
To the extent that Bankman-Fried knew of (or should have known) of Friedberg's past misdeeds with UltimateBet and Absolute and hid that info while befriending Dwan speaks poorly to Bankman-Fried's character. Dwan was victimized for at least a small-six digit sum on UltimateBet alone, and though he received one of the largest refunds UB made, there are still significant doubts as to whether Dwan and other high-stakes pros were even close to fully refunded in a process that Friedberg tried to limit.
Yet Dwan himself comes off as less than altruistic in another aspect of the expanding FTX mess. The core of FTX's fraud involves inflated and imaginary assets at FTX's market-trading subsidiary, Alameda Research, of at least $8 billion. Yesterday, Dwan tweeted this:
Whether Dwan may have hid his knowledge of "corruption" at FTX for possible personal benefit, or whether he was protecting "nice" insiders at the company who weren't involved in the scam, will be subject to ongoing debate. Dwan is correct in his insinuation that corruption is everywhere in business, yet such disclaimers, given the massive scale of the FTX fraud, will still leave a sour taste in the mouths of some FTX victims. Under no circumstance, of course, should that be taken as meaning that Dwan was in anyway involved in the FTX scam.
Dwan, for his part, has also thrown some shade at Gary Gensler, the Chairperson of the U.S. Securities and Exchange Commission (SEC). Gensler met with Bankman-Fried last March where the two discussed forming an SEC-regulated crypto trading platform. Given Gensler's probes into other questionable crypto operations, but not FTX's, and reports that Bankman-Fried may have made substantial donations to Democratic political funds, the FTX scandal may well develop a political aspect to rival its financial impact. Dwan hinted at providing some info to D.C. bureaucrats, too:
Bankman-Fried prevented from leaving Bahamas
Meanwhile, the debris field from FTXs implosion continues to emerge from the smoke. Bankman-Fried and at least two other executives have been loosely detained by authorities in the Bahamas, where FTX's offices are located. Mainstream financial outlets have reported that the FTX officials had hoped to flee to Dubai before their passports were confiscated. A fourth executive, Alameda Research CEO Caroline Ellison, was also reported as being detained on the way to Dubai, but in Hong Kong instead of the Bahamas.
Crypto watchers and investors have also watched another Bahamas angle with some interest. Amid FTX's collapse, blockchain watchers were able to track tens of millions being siphoned from FTX's remaining reserves to shadowy Bahamian accounts that many believe are linked to the core FTX insiders. One widely prevailing theory is that the transfers were connected to the creation and sale of digital NFT assets that are then being resold as a way to transfer some otherwise frozen assets.
On Thursday, via its official Twitter account, FTX declared, "Per our Bahamian HQ's regulation and regulators, we have begun to facilitate withdrawals of Bahamian funds. As such, you may have seen some withdrawals processed by FTX recently as we complied with the regulators."
However, the Securities Commission of the Bahamas denied asking FTX to create and arrangement or prioritization to benefit Bahamian accountholders. The "complying with regulators" phrase was a lie fomented by FTX.
The SCB also warned that illicit withdrawals could be clawed back if FTX is found to have violated Bahamian financial regulations. The backdoor Bahamian withdrawals may also create a new chapter in Friedberg's story, as the wayward ex-UltimateBet lawyer would have had involvement in any regulatory construct that purportedly enabled such withdrawals.
Featured image source: FTX
