FTX-Exec Helped Pay Hush Money To Silence Potential Whistleblowers, Lawsuit Claims

investopedia.com:

New management at bankrupt crypto exchange FTX has filed a lawsuit against former Chief Compliance Officer (CCO) Daniel Friedberg, alleging he enabled fraud and paid «hush money» to prevent employees and their attorneys from exposing those fraudulent activities.

Just a couple of days after a scathing report by FTX's new CEO John J. Ray III claimed FTX intentionally misused and misappropriated customer funds prior to its November 2022 collapse, this new lawsuit could shed more light on the role that some prominent executives played.

FTX's filing includes multiple civil charges against Friedberg, accusing him of breaching his legal duties, approving fraudulent transfers, and granting loans to other former FTX executives. During his tenure at FTX, Friedberg allegedly received substantial compensation, including a $300,000 salary, a $1.4 million signing bonus, a separate $3 million cash bonus, 8% equity in FTX US, and crypto holdings worth tens of millions of dollars as of 2020. FTX is seeking to recover these assets through this legal action.

More specifically, the lawsuit claims Friedberg made payments to two unnamed potential whistleblowers, effectively silencing them and obstructing the disclosure of regulatory issues and the close ties between FTX and trading firm Alameda Research.

According to FTX's complaint, Friedberg acted as a «fixer» for a co-founder and former CEO Sam Bankman-Fried. Allegedly, Bankman-Fried's father advocated for Friedberg to have a central role within the organization. In addition to his role as FTX CCO, Friedberg was also the General Counsel for Alameda.

Specific details of the payments made to the whistleblowers are redacted in the complaint. However, one incident mentioned the provision of an