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FTX, a bankrupt crypto exchange, has filed a lawsuit towards its former chief compliance/regulatory officer, Dan Friedberg, after his alleged conflicts of curiosity involving Sullivan & Cromwell (S&C) and Ryne Miller, FTX’s ex-U.S. Common Counsel. Friedberg claimed S&C exploited Chapter 11 insolvency proceedings to safe excessive service charges from FTX, resulting in over $40 million in fees since November 2022:
“Friedberg suggested Bankman-Fried, his trusted interior circle, and the FTX Group on authorized and compliance issues and vital transactions, ignored the FTX Group’s obtrusive lack of inside controls, and served as a “fixer” tasked with, amongst different issues, paying off whistleblowers who threatened to show the true fraudulent nature of the FTX Group enterprise.”
The lawsuit, in flip, brings critical allegations towards Friedberg. It states Friedberg was employed beneath Sam Bankman-Fried — the previous CEO and notorious founding father of FTX — father’s insistence, who believed the corporate wanted a devoted overseer, or “somebody to be on prime of every thing.” His compensation included a $300,000 annual wage, a $1.4 million signing bonus, an 8% stake in FTX U.S. and extra perks, together with a $3 million bonus in 2021 and $30 million price of Serum tokens.
The lawsuit additionally alleges Friedberg’s involvement in establishing a number of shell firms for FTX to open accounts, one in every of which had a false web site promoting digital items with no hyperlinks to FTX or Alameda. It additionally accuses Friedberg of creating hush-money funds to silence potential authorized threats:
“Many U.S. banks had been reluctant to do enterprise with cryptocurrency firms […] Friedberg solved this drawback by creating shell entities that hid the involvement of FTX.”
When questions had been raised about governance and regulatory issues, Friedberg allegedly supplied severance packages fairly than conducting correct investigations. The lawsuit additional implicates him in getting ready substantial mortgage agreements to FTX’s founders, amounting to over $2 billion, which stay unpaid.
FTX filed for Chapter 11 bankruptcy on November 11, 2022, adopted by SBF stepping down as CEO. Now, John Ray III, the trade’s new CEO, is main the chapter proceedings. Ray started with a public internal audit final month to additional “our acknowledged goal of transparency.” The audit revealed that FTX owes its clients round $7 billion in liquid belongings.
This lawsuit towards Friedberg is simply the subsequent step to supply some solace to FTX collectors.