FTX Sues Former Compliance Chief Who Allegedly Silenced Whistleblowers

The lawsuit against Daniel Friedberg claims that he helped obscure the relationship between FTX and Alameda, drafted sham agreements to conceal the misuse of customer funds and used hush money to silence whistleblowers.

In a lawsuit filed on June 27, lawyers representing bankrupt crypto exchange FTX alleged that a former executive Daniel Friedberg served as a “fixer” who covered up the fraudulent nature of the exchange, paying off those who threatened to expose these activities.

Friedberg served as both Chief Compliance Officer at FTX and FTX.US, as well as General Counsel of Alameda Research. Although he provided legal advice to Sam Bankman-Fried and his inner circle since 2017, Friedberg officially joined the FTX Group in January 2020 with an annual salary of $300,000 and a signing bonus of $1.4 million. 

The complaint alleged that in the 22 months of his tenure, Friedberg actively assisted in diverting the misappropriated funds from the FTX group for the benefit of insiders. He did this by creating shell companies and drafting sham intercompany agreements. 

The FTX lawyers further alleged that Friedberg whitewashed the complaints of multiple whistleblowers, one of which was filed as early as November 2019. Friedberg bought the plaintiff’s attorneys’ silence by reportedly paying them $3.3 million.

In another instance in December 2021, the FTX lawyers found that Friedberg had bought a former FTX.US employee’s silence by paying her “exorbitant hush money” when she discovered the firm had engaged in various forms of market manipulation.

That same month, Friedberg allegedly bought off a third person who attempted to expose the FTX Group, an attorney for Alameda who raised concerns about the firm’s disbursement of funds to customers without money transmitter licenses. Friedberg then terminated this employee after paying them a severance package, the amount of which has been redacted from the complaint.

In total, the filing laid out 11 civil charges against the former head of compliance at FTX and claims that he breached his fiduciary duty by enabling funds to be siphoned from the group of companies for his own benefit. The FTX lawyers are now looking to claw back all compensation he received along with punitive and compensatory damages.