Jan 5 (Reuters) – Former FBI chief counsel Daniel Friedberg has cooperated with U.S. prosecutors in their probe into the crypto firm’s bankruptcy, a source familiar with the matter said, adding pressure on founder Sam Bankman-Fried, who was arrested last month on felony fraud charges. he said. .
Friedberg gave details about the FTX in a meeting with two dozen investigators on November 22. The meeting, held at the office of the US Attorney for the Southern District of New York, included officials from the Department of Justice, the Federal Bureau of Investigation and the US Securities and Exchange Commission, the source said. Emails between participants who planned the meeting with those agencies were seen by Reuters.
At the meeting, he told prosecutors what he knew about Bankman-Fried’s use of client funds to finance his business empire, the source said. Friedberg recalled conversations he had with other senior executives on the matter and provided details about how Bankman-Fried’s Alameda Research hedge fund operates, the source said.
Friedberg’s cooperation has not been previously reported. He has not been charged and has not been informed of a criminal case, the source said. Instead, he expects to be called as a government witness at Bankman-Fried’s October trial, the person said.
Friedberg’s attorney, Telemachus Kasulis, and the FBI and FTX did not respond to requests for comment about his cooperation. A spokeswoman for the SEC, the Justice Department and Bankman-Fried declined to comment.
Bankman-Fried is accused of diverting billions of dollars in FTX client funds to Alameda venture investments, luxury real estate purchases and political donations. He pleaded not guilty Tuesday in federal court in Manhattan.
Manhattan U.S. Attorney Damian Williams, who is leading the criminal case against the now-bankrupt FTX, said last month: “If you have been involved in wrongdoing at FTX or Alameda, now is the time to come forward.”
Two of Bankman-Fried’s closest associates, former Alameda CEO Caroline Ellison and former FTX chief technology officer Gary Wang, pleaded guilty to fraud and agreed to cooperate. Ellison’s attorney did not respond to a request for comment. Wang’s lawyer declined to comment.
MEETING WITH PROSECUTORS
FTX filed for bankruptcy protection on November 11. A few days later, on November 14, Friedberg received a call from two FBI agents based in New York. He told them he was willing to share the information but would have to ask the FTX to waive attorney-client privilege, according to a person familiar with the matter and emails reviewed by Reuters.
Friedberg wrote to the FTX the next day, asking the company to waive his privilege so he could cooperate with prosecutors. The FTX did not, but agreed with Friedberg on what he could disclose to investigators, the person said.
“I want to cooperate in every way,” Friedberg later wrote back to two FBI agents in an email reviewed by Reuters.
The U.S. Attorney’s Office arranged a meeting where Friedberg signed so-called offer letters prepared for him by the SEC and other agencies, according to the source and an email exchanged by participants. Offer letters typically describe a potential settlement between authorities and individuals who are witnesses or subjects of an investigation.
“THICK AND LIGHT”
Prior to his advisory role at FTX, Friedberg advised a mix of banking, fintech and online gaming companies.
One of his previous employers, Excapsa Software, a Canadian online gaming firm where he was a senior consultant, also became embroiled in controversy over a cheating scandal involving a poker site called Ultimate Bet. In 2008, Canada’s gaming commission fined Ultimate Bet $1.5 million for failing to take measures to prevent fraud. Excapsa has since been decommissioned.
According to an audio recording available on the PokerNews website, Friedberg and some other Ultimate Bet partners discussed how to handle the scandal that year and minimize the amount owed to players. Friedberg previously told NBC News that the audio was recorded illegally, but the NBC article did not mention that Friedberg disputed its authenticity.
Friedberg first represented Bankman-Fried in 2017 as outside counsel at U.S. law firm Fenwick & West, where he led the payment systems group, a source familiar with the matter said. Friedberg advised Bankman-Fried to run Alameda, which he founded that year, the source said at the time.
In 2020, when Bankman-Fried launched a separate exchange for US clients called FTX.US, Friedberg moved in-house as FTX’s chief regulatory officer.
In a since-deleted blog post published on the FTX website that year, Bankman-Fried wrote that Friedberg had been FTX’s legal advisor “from the beginning” and noted that he had “been with us on matters big and small.”
Friedberg resigned Nov. 8, a day after Bankman-Fried told senior executives that FTX was nearly out of money, according to the source and three other people briefed on the talks, along with text messages exchanged by the legal team. time.
Additional reporting by Hannah Lang; Edited by Megan Davies and Anna Driver
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