Key Takeaways
- The lawsuit accuses Friedberg of breaching his legal duties, authorizing fraudulent transfers, and facilitating “hush money” payments to potential whistleblowers.
- FTX aims to recover substantial amounts, including Friedberg’s reported $300,000 salary,
FTX, the cryptocurrency exchange that faced a significant downfall last year, has recently taken legal action by filing a lawsuit against Daniel Friedberg, a former executive who held multiple important roles within the company.
The lawsuit accuses Friedberg of various misconduct, including breaching his legal duties, authorizing fraudulent transfers, and facilitating “hush money” payments to potential whistleblowers to suppress information about regulatory issues and alleged close connections between FTX and Alameda Research.
Hush Money is typically offered as a form of compensation or incentive to maintain confidentiality, often in situations where the disclosed information could be damaging or detrimental to the interests of the party offering the payment.
In a comprehensive 40-page complaint, FTX aims to recover substantial amounts, such as Friedberg’s reported $300,000 salary, a $1.4 million signing bonus, and 8% equity in FTX US, all of which were supposedly granted during his 22-month tenure at the exchange. FTX’s new management has, in numerous court filings, former executives misused alleged company funds.
This lawsuit comes shortly after FTX initiated legal proceedings against Kivesa, a former Hollywood agent turned investor, and his investment firm, K5. FTX alleges that Kivesa and his firm misappropriated funds, and FTX are actively seeking the return of these allegedly diverted assets.
Reportedly, in 2022, Bankman-Fried, the co-founder of FTX, approved a transfer of $700 million to entities associated with K5. During that time, Bankman-Fried leveraged K5’s extensive network of celebrity and business connections as part of his efforts to secure rescue financing in the days leading up to FTX’s eventual bankruptcy in November 2022.
FTX’s troubles began with its widely publicized collapse last year, leading to bankruptcy. Subsequently, prosecutors have brought forth allegations of criminal mismanagement within the company. In December, co-founder Sam Bankman-Fried was arrested in the Bahamas and faced eight financial crime charges by the Complex Frauds and Cybercrime Unit in the Southern District of New York.
While Bankman-Fried pleaded not guilty in January, he was hit with additional charges in February, bringing the total count against him to 13, including conspiracy to commit wire fraud and defraud the United States while violating campaign finance laws.
