Bankrupt cryptocurrency exchange FTX sued one of its former top lawyers, accusing him of aiding fraud by company founder Sam Bankman-Fried and silencing whistleblowers who reported wrongdoing at the company.
The complaint, filed on Tuesday in US Bankruptcy Court in
Delaware, describes Daniel Friedberg, a former chief compliance officer at FTX
and general counsel of its related crypto hedge fund Alameda Research, as a
"fixer" for Bankman-Fried and other FTX executives who enabled the
"wholesale raiding" of customer funds.
Friedberg “whitewashed” complaints from employees raising
concerns about the activities of FTX and Alameda by settling claims for
“inflated” amounts and in some cases hiring law firms that represented
whistleblowers to perform legal work for FTX, the company said.
The settlement amounts are redacted in the complaint.
A lawyer for Friedberg and a spokesperson for FTX did not
immediately respond to requests for comment.
The lawsuit accuses Friedberg of legal malpractice and
breaching his fiduciary duty. It seeks to claw back “tens of millions” worth of
cryptocurrency Friedberg received while working for FTX, along with his
compensation and $3 million in bonuses.
FTX filed for bankruptcy in November 2022 after a run on
customer deposits. The company's new leadership has accused Bankman-Fried and
his associates of widespread failures to implement corporate controls.
Bankman-Fried has been criminally charged in federal court
in Manhattan with stealing billions in FTX customer funds to plug holes at the
Alameda hedge fund and fund speculative investments. Bankman-Fried has pleaded
not guilty and denied stealing funds.
At least three other FTX executives have pleaded guilty to
US charges.
Friedberg has cooperated with US investigations into the FTX
collapse, Reuters has reported.
Friedberg served as an adviser to Bankman-Fried and his
companies while working at law firm Fenwick & West. He became an in-house
attorney at both FTX and Alameda in 2020. © Reuters
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