FTX sues ex-compliance officer Daniel Friedberg

Current leadership for FTX sued the company’s former compliance officer, Daniel Friedberg, as seen in a court filing dated June 27.

Friedberg allegedly breached duties

The filing broadly alleges that Friedberg breached his fiduciary duties and engaged in misconduct. Friedberg previously served as Chief Compliance Officer at FTX, General Counsel at Alameda Research, and in other internal and external positions.

Critically, FTX alleged that Friedberg caused the waste of company assets and helped former FTX CEO Sam Bankman-Fried and other executives divert funds.

FTX specifically said that Friedberg created an entity called North Dimension to commingle and misappropriate funds. It also alleged that, when a planned IPO required an audit, Friedberg created a “sham” intercompany agreement to hide transfers.

Furthermore, Friedberg was accused of “whitewashing” or covering up whistleblower complaints that concerned the company’s misuse and commingling of funds. Friedberg allegedly fired and paid off one whistleblower with a severance package.

Plus, Friedberg also helped carry out billions of dollars of transfers to FTX executives and portrayed those transfers as company loans. In fact, the supposed loans were not repaid and could not have been repaid, according to the filing.

In one section, FTX alleged that the early company was “insolvent at all relevant times” and was “built on a house of cards” from the time of its creation. FTX asserted that Friedberg supported a scheme that defrauded and hindered customers.

FTX seeks fines and damages

FTX, under its current management, now seeks various fines, damages, and disgorgements from Friedberg. It has also asked for certain property to be returned with interest. The relevant amounts will be determined in a future trial.

FTX filed the charges as part of the firm’s ongoing bankruptcy proceedings in the U.S. Bankruptcy Court for the District of Delaware.

Other recent reports suggest that FTX is attempting to restart operations under its current leadership. The company owes its users $8.7 billion — the majority of which has been recovered despite being missing or misappropriated in the past.

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