bankrupt cryptocurrency exchange ftx sued one of its former top lawyers, accusing it of aiding and abetting fraud by company founder Sam Bankman-Fried and silencing whistleblowers who reported wrongdoing at the company.
The complaint, filed Tuesday in U.S. Bankruptcy Court in Delaware, describes Daniel Friedberg, the former chief compliance officer of FTX and general counsel of its related crypto hedge fund Alameda Research, as a “fixer.” Bankman-Fried and other FTX officials who enabled the “wholesale raid” of customer funds.
The company, Friedberg said, responded to concerns raised about FTX and Alameda’s activities by settling claims for “inflated” amounts and in some cases by hiring law firms representing whistleblowers to do legal work for FTX. “Whitewashed” the grievances of the employees.
The settlement amount has been revised in the complaint.
Friedberg’s attorney and a spokeswoman for FTX did not immediately respond to requests for comment.
The lawsuit accuses Friedberg of legal misconduct and breach of his fiduciary duty. It aims to withdraw “millions” worth of cryptocurrencies Friedberg received while working for FTX, along with $3 million (roughly Rs. 24 crores) in his compensation and bonuses.
FTX filed for bankruptcy in November 2022 after freezing customer deposits. The company’s new leadership accused Bankman-Fried and their partners of widespread failures to enforce corporate controls.
Bankman-Fried has been criminally charged in federal court in Manhattan with stealing billions in FTX client funds to plug holes in the Alameda hedge fund and fund speculative investments. Bankman-Fried has pleaded not guilty and denied stealing the money.
At least three other FTX executives have pleaded guilty to US charges.
Reuters has reported that Friedberg has cooperated with the US investigation into the FTX collapse.
Friedberg served as a consultant to Bankman-Fried and their companies while working at the law firm Fenwick & West. He became in-house counsel at both FTX and Alameda in 2020.