The highest “regulatory officer” at fallen crypto change FTX as soon as served as an legal professional for a corporation that was embroiled in a infamous on-line poker dishonest scandal greater than a decade in the past — and was caught on tape allegedly aiding the perpetrators of the fraud, in line with experiences.
Dan Friedberg — a lawyer who was FTX’s chief regulatory officer within the months main as much as its collapse and who additionally did a stint as its common counsel — additionally had served as an legal professional for UltimateBet, whose collapse was thought of one of many largest on-line playing scandals in historical past on the time.
Within the alleged scheme — which reportedly claimed actor Ben Affleck amongst its victims — workers between 2005 and 2008 had been accused of utilizing a software program exploit dubbed “God mode” to bilk gamers out of wherever between $20 million and upwards of $50 million.
The scandal drew protection from CBS Information’ “60 Minutes” and spawned a cult documentary referred to as “UltimateBeat: Too A lot To Lose.”
Friedberg, who reportedly resigned from FTX firm earlier this month because it filed for chapter, seems to have since scrubbed his LinkedIn account, which now shows a message “this web page doesn’t exist”. On-line bios for Friedberg mentioned he joined FTX after a stint on the Seattle-based legislation agency Fenwick & West, the place he chaired the funds techniques follow.
FTX, in the meantime, has taken down an “about” web page that listed quick bios for its high executives, together with disgraced ex-CEO Sam Bankman-Fried, FTX co-founder Gary Wang and Friedberg, in addition to hyperlinks to their LinkedIn pages.
The UltimateBet scandal arose after revelations that a number of the website’s workers had been utilizing the software program exploit to peek at on-line opponents’ playing cards throughout arms and guess accordingly.
Right here’s the newest protection on the collapse of crypto big FTX
In 2008, the Kahnawake Gaming Fee, the Canada-based regulatory physique that licensed UltimateBet, mentioned it “discovered clear and convincing proof” that Russ Hamilton, a UltimateBet co-owner and marketing consultant, “was the primary particular person accountable” for the rip-off, together with a handful of accomplices.
Friedberg’s involvement surfaced after recordings of his conversations with the poker website’s high brass was leaked to the general public in 2013. The recordings had been taken throughout a gathering in early 2008 between Hamilton, Friedberg and different executives and had been reportedly leaked by Travis Makar, Hamilton’s longtime assistant. Friedberg was by no means personally accused of wrongdoing and there's no indication that he was ever even investigated by prosecutors or regulators.
Friedberg may be heard on tape discussing how UltimateBet ought to reply and deal with media inquiries. Friedberg additionally suggested firm executives on a method to restrict payouts to victims by withholding the extent of the scheme.
“I believe, for the general public, it simply needs to be, ‘Former marketing consultant to the corporate took benefit of a server flaw by hacking into the shopper, unable to establish precisely when,'” Friedberg allegedly mentioned on the tape, dictating a script in a bid to shortchange victims of the fraud.
Friedberg even suggested Hamilton to say he additionally was a sufferer of the scandal as a result of “in any other case it’s not going to fly.” He acknowledged on tape that the liquidator for Excapsa, the software program agency that owned UltimateBet, had $47 million available for potential payouts – however that executives needed to restrict the whole to not more than $5 million.
“If we are able to get it down to 5, I’d be pleased,” Friedberg added relating to potential payouts.
At one level within the recording, Hamilton admitted his guilt whereas immediately addressing Friedberg.
“I did take this cash and I’m not making an attempt to make it proper, Dan, so we gotta get that out of the way in which straight away, actual fast,” Hamilton mentioned.
The recordings had been broadly coated by poker media shops after they first surfaced, together with Poker Information, which identified the connection between FTX, Friedberg and the UltimateBet scandal final week. Poker.org additionally posted a retrospective on Friedberg’s UltimateBet saga — and speculated about attainable parallels with FTX.
“Friedberg would nearly actually have served an essential authorized and practical position find methods to make FTX’s companies and construction seem official within the eyes of monetary regulators across the globe,” Poker.org’s Haley Hintze wrote final week.
The Publish couldn't instantly be decide whether or not Friedberg had any disciplinary motion over his involvement with UltimateBet. A Daniel S. Friedberg with experience in banking and securities continues to be listed as eligible to follow legislation on the Washington State Bar Affiliation’s web site.
In its 2008 section, “60 Minutes” reported that “jurisdictional points” had prevented any felony costs from being filed towards Hamilton or others implicated within the scandal. The audio tapes revealing Friedberg’s involvement didn't floor till years after the Kahnawake Gaming Fee launched its findings.
Bankman-Fried is alleged to have transferred $10 billion in FTX shopper funds to assist prop up Alameda Analysis, a cryptocurrency buying and selling home he additionally owned. No less than $1 billion of these funds continues to be lacking.
In a courtroom submitting on Thursday, FTX’s new CEO John Ray III, slammed what he described as a whole lack of regulatory guardrails at company oversight on the platform below earlier management – and declared the scenario was worse than what he encountered whereas steering notorious power agency Enron via its chapter.
“By no means in my profession have I seen such a whole failure of company controls and such a whole absence of reliable monetary info as occurred right here,” Ray mentioned within the submitting.
Friedberg’s previous raised alarm bells within the cryptocurrency sector lengthy earlier than FTX’s downfall. In August 2021, cryptocurrency information website CoinGeek famous that FTX’s choice to faucet Friedberg as its chief regulatory officer was “nearly comically inappropriate” given his previous.
CoinGeek’s Steven Stradbrooke famous it “stays one thing of a thriller” how Friedberg “managed to keep away from being disbarred” after the recordings surfaced.
“Friedberg’s presence on FTX’s payroll means Sam Bankman-Fried (SBF) both didn’t do his due diligence earlier than hiring, or he knew of Friedberg’s previous sins and didn’t care. Neither of those choices paints Sam Bankman-Fried in a very flattering gentle,” Stradbrooke wrote.
Elsewhere, short-seller Marc Cohodes identified Friedberg’s involvement whereas predicting FTX’s downfall throughout a Sept. 3 look on the Hedgeye Investing Summit – a full two months earlier than the platform crumbled.
On the time, Cohodes, who has a popularity for uncovering fraud, argued that FTX was “soiled and rotten to the core.”
“In the event you hit up Dan Friedberg’s LinkedIn, there’s no point out of his time on the poker website, there’s no point out of it, but he’s the chief f—king regulatory officer of FTX, which is a giant f—king job,” Cohodes mentioned.
“Both FTX knew they employed a chief regulatory officer who was a part of a card-cheating scandal, both they knew that, or he coated it up and acquired employed,” Cohodes added.
The Publish has reached out to Friedberg, Bankman-Fried and FTX for remark.
To date, Friedberg has been quiet about what transpired at FTX regardless of his presumably giant position within the agency’s oversight. A point out of his involvement surfaced in a latest Wall Avenue Journal article, which quoted a pal who had dinner with Friedberg the day of his resignation.
The supply mentioned Friedberg was “visibly shaken” throughout the dinner and that the ex-FTX legal professional had confirmed them a textual content message he purportedly despatched to Bankman-Fried, which learn, “At some point I hope I can forgive you.”
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