FTX Alleges Ex-Lawyer Aided Bankman-Fried's Fraud and Silenced Whistleblowers

Reuters reported that one of its former top lawyers at FTX, a bankrupt cryptocurrency exchange, is being sued for allegedly assisting in fraud committed by company founder Sam Bankman-Fried and suppressing whistleblowers who reported misconduct within the company.

The lawsuit, filed in the U.S. Bankruptcy Court in Delaware on Tuesday, characterizes Daniel Friedberg, who previously held the positions of chief compliance officer at FTX and general counsel of the affiliated crypto hedge fund Alameda Research, as a "fixer" for Bankman-Fried and other FTX executives.

The lawsuit claims that Friedberg facilitated the improper diversion of customer funds and dismissed employee complaints against FTX and Alameda by settling claims for exaggerated amounts and even engaging law firms representing whistleblowers to provide legal services to FTX. The specific settlement amounts are redacted in the complaint. The lawsuit alleges legal malpractice and breach of fiduciary duty on the part of Friedberg and seeks the recovery of the cryptocurrency he received while working for FTX, as well as his compensation, including $3 million in bonuses, totaling "tens of millions" of dollars.

Bankman-Fried himself faces criminal charges in federal court in Manhattan for allegedly misappropriating billions of dollars from FTX customer funds to cover losses at the Alameda hedge fund and finance speculative investments. He has pleaded not guilty and denied any wrongdoing.

Related: Bankman-Fried's Bid to Dismiss Criminal Charges Over FTX's Collapse Denied: Reuters

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Reuters