He was the ultimate crypto cleaner – a lawyer, fixer and more for Sam Bankman-Fried and his FTX business empire.
Daniel Friedberg, FTX’s former chief regulatory officer, now is being pulled even deeper into the intrigue surrounding his former boss Bankman-Fried, who’s hurtling toward one of the biggest white-collar criminal trials in US history. In a lawsuit filed last week, the new management of FTX accused Friedberg of enabling Bankman-Fried’s alleged crimes, and helping to orchestrate a “wide-ranging con game” to raid billions of customer dollars.
Legal documents, screen shots of messages involving Friedberg seen by Bloomberg News, and interviews with more than a half dozen of his former colleagues — who spoke on the condition of anonymity because of the ongoing FTX legal proceedings — paint a portrait of a man whose complex role at the crypto conglomerate extended well beyond dispensing legal advice.
Friedberg, who isn’t among those charged in the FTX case, remains one of the few people from Bankman-Fried’s inner circle who has not entered a cooperation agreement with prosecutors. Three former executives have pleaded guilty to fraud, agreed to cooperate with the government and give evidence against Bankman-Fried, in exchange for the possibility of lighter sentences.
A person who answered Friedberg’s phone declined to speak to Bloomberg and Friedberg didn’t respond to a list of questions sent via email and text. A spokesman for Bankman-Fried declined to comment.
Key Adviser
Like Michael Clayton, George Clooney’s titular box-office character, Friedberg cleaned up messes and made problems disappear, according to the lawsuit. He cut deals and smooth-talked doubters. At least twice, he silenced whistleblowers, the suit alleges, adding that he made millions for himself in the process.
Bankman-Fried counted Friedberg, who turns 53 this month, among his closest confidants, according to people who worked with the two men. The young crypto mogul’s father, Joe Bankman, encouraged his son to hire Friedberg, who had been working closely with FTX and affiliated companies at outside counsel Fenwick & West. Friedberg joined Bankman-Fried’s crypto company in 2020, becoming one of his biggest boosters.
‘Great Job Sam!’
Bankman-Fried is accused by prosecutors of misappropriating billions in customer funds to fuel high-risk trades, investments, political donations and real estate. He pleaded not guilty to criminal charges of conspiracy and fraud. The 31-year-old is due to face trial in October.
Before his downfall, Bankman-Fried fashioned himself as an approachable face of the crypto industry — including on Capitol Hill, where he testified in 2021 about the stability and trustworthiness of FTX.
“Great job Sam!” Friedberg wrote of Bankman-Fried’s testimony, according to messages seen by Bloomberg News. “Somehow you avoided even saying where you lived now!”
A colleague in that chat suggested Bankman-Fried make similar appearances more often.
“Lol,” Friedberg wrote back. “We dodged a minefield, let’s not make it a habit.”
The next year, when crypto markets turned south and FTX employees were becoming nervous about delays to bonus payments, Friedberg suggested a fix: “I’d suggest we pay out all bonuses less than $100k asap,” he wrote in a message obtained by Bloomberg News. “Management can wait.”
Friedberg earned millions in less than two years at FTX and its affiliated companies, the lawsuit claims. He received a more than $3 million cash bonus in 2021, on top of a $300,000 annual salary, a $1.4 million signing bonus and an 8% equity stake in FTX US. He held $33.7 million worth of the virtual token Serum — also gained through FTX — at the time the exchange declared bankruptcy in November, according to the FTX lawsuit filed last week.
Customer Funds
When FTX’s trading affiliate Alameda Research invested $11.5 million in tiny Washington-based Moonstone Bank, Friedberg helped broker the deal, according to two people familiar with the matter. Headquartered in the same state where Friedberg worked, Moonstone Bank gave Bankman-Fried’s company a foothold in the US financial system.
According to FTX’s lawsuit against Friedberg, he also set up a separate shell company. The new management of the company said he “directed the formation” of North Dimension, which FTX could use to address a major problem: banks typically didn’t want to work with crypto companies. Through the North Dimension shell, FTX could maneuver more easily. FTX eventually channeled tens of millions of dollars of customer funds through North Dimension’s accounts for high-risk trades, political donations, loans to its executives and more, the suit alleged.
Bahamas and Miami
A top priority for Friedberg was laying the foundation for FTX to operate in the US and the Bahamas, according to people familiar with his role and descriptions of his activities in court documents.
At a time when regulators were skeptical of offshore crypto companies circumventing US banking rules, Bankman-Fried moved his FTX conglomerate from Hong Kong to the Bahamas.
In July 2021, an FTX lawyer offered a former Bahamian government official a $1 million bonus to secure a license for FTX within 10 weeks — a task that was accomplished in six — according to court records filed in FTX’s bankruptcy case. A person familiar with the matter said that Friedberg was the FTX lawyer and Allyson Maynard-Gibson, the ex-Bahamas’ attorney general, was the government official.
Maynard-Gibson, who hasn’t been accused of wrongdoing, didn’t respond to a request for comment.
Back in the US, Friedberg worked to pump up FTX’s PR offensive. He helped persuade officials in Florida to change the name of the NBA’s Miami Heat home stadium to the FTX Arena, in a $135 million deal.
“Sam is a remarkable man,” Friedberg told local officials in a meeting. “His job every day is to try to make as much money as he can for charity.”
“He cares most about compliance and doing the right thing,” Friedberg added.
More recently, Friedberg distanced himself from the deal. Documents filed in federal court in Florida showed he offered to help lawyers working on a class-action lawsuit against FTX that hinges on its sports and celebrity endorsements, including with Tom Brady and Gisele Bundchen. He’s said a junior FTX colleague dreamed up the Miami stadium deal, according to his sworn statement filed in the class action case.
Going Quiet
Like most good lawyers, Friedberg could play tough at times. In 2022, when a new attorney for Alameda became concerned about how the trading arm was handling money, Friedberg fired him, according to the lawsuit and a report from FTX’s new management.
David Mastrianni and Hussein Faraj, two people who did business with FTX and Alameda, said in interviews that Friedberg sought to bargain with them in return for keeping quiet after they accused the companies of orchestrating pump-and-dump schemes.
By the time FTX officially filed for bankruptcy, Friedberg had quit.
Since then, he’s been quick to offer his version of events to federal prosecutors. He was among the first to speak with authorities about what occurred at FTX, according to two people familiar with the matter. Prosecutors have not revealed whether Friedberg will be called as a witness.
Ultimate Bet
In some ways, Dan Friedberg seemed cut out for a job at FTX, avatar of the crypto boom and bust. He spent part of his career as general counsel at another place where dreamers and gamblers gather: the parent company of Ultimate Bet, a poker website.
Ultimate Bet ran into trouble when it became embroiled in a cheating scandal over conduct that took place between 2003 and 2007.
Software at the site included a secret “God Mode” that enabled select players to glimpse at their opponents’ cards. Following an ownership change, the parent company was fined $1.5 million and refunded more than $22 million to the players who’d been cheated.
Following the collapse of FTX, a participant in a December 2022 Twitter Spaces event asked Bankman-Fried why he’d hired Friedberg, given the attorney’s connection to the poker website.
“Dan was obviously one of the people who had been working for FTX for a while,” Bankman-Fried replied. “Our legal and regulatory team had an enormous task in front of them. We were looking to get licensed and regulated in dozens of jurisdictions at once,” he said.
“That was an unbelievably large undertaking, which I think took up most of the time of most of our legal and compliance departments. And in retrospect I think probably took up too much time.”
--With assistance from Ben Bain.
Author: Annie Massa and Ava Benny-Morrison
