Daniel Friedberg, the attorney at the heart of the Ultimate Bet poker scandal, has been named as a defendant in a high-profile lawsuit brought in the FTX cryptocurrency collapse...
Friedberg worked for FTX crypto exchange and hedge fund as chief compliance officer, with responsibility for ethical standards and compliance with internal and external standards.
As we reported previously, FTX failed on those counts when it’s hedge fund arm, Alameda, traded and lost $8billion, leading to a run on the “bank” and eventual insolvency and bankruptcy proceedings.
With so much money lost, legal proceedings were always going to surface and Friedberg – recently described by Coingeek’s Steven Stradbrooke as being “almost comically inappropriate” for the job – has been named alongside some huge names from the sporting world in a class-action lawsuit.
US football star quarterback Tom Brady, Brazilian model Gisele Bundchen, basketball legends Stephen Curry, Shaquille O’Neal and Udonis Haslem, as well as tennis star Naomi Osaka were named, among others, accused of false representation for promoting FTX.
FTX co-founders, Sam Bankman-Fried and Gary Wang, as well as Alameda’s CEO Caroline Ellison and former CEO Sam Trabucco, have also been named in the lawsuit brought by Gregg Podalsky, Gary Gallant, Skyler Lindeen, Alexander Chernyavsky, and David Nicol.
Friedberg’s involvement will now come under intense scrutiny, one bankruptcy specialist stating of the FTX collapse: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
Daniel S. Friedberg’s Ultimate Bet involvement
Friedberg is well-known to those who were around for the Ultimate Bet scandal of the late noughties.
He was one of the Ultimate Bet lawyers present at a secretly-recorded meeting in which Ultimate Bet boss Russ Hamilton admitted to cheating and stealing players’ money. Some $50million was robbed from other players in the super-user scandal, with Hamilton having “God-mode” access to everyone’s hole cards.
The audio recording, which surfaced in 2013 – five years after the meeting – reveals Friedberg actively conspiring to lie about what had actually happened.
Hamilton is heard on tape telling Friedberg: “I did take this money and I’m not trying to make it right, Dan, so we gotta get that out of the way right away, real quick.”
Friedberg advises Hamilton to not only claim he was also a victim of the cheating – “otherwise it [the concocted cover-up tale] is not going to fly” – but also to put out a story that “a former consultant to the company, uh, took advantage of a server flaw by hacking into the client.”
The people at the meeting – Hamilton, Friedberg, Ultimate Bet founder and CEO Greg Pierson, and Friedberg’s fellow UB attorney Sanford Millar – also discussed how much it was going to cost them to repay players and regulatory fines.
“If we could get it down to five, I’d be happy,” says Friedberg, advising his fellow cover-up members that it was a realistic figure “depending how creative we get.”
Ultimate Bet was eventually sold to Absolute Poker in a murky process that saw many people share in the riches while others lost out on big investments. Friedberg was one of the former group and continued his unethical work at AP.
Daniel S. Friedberg and the FTX lawsuit
The most recent of the 7 lawsuits so far brought against FTX head honcho Bankman-Fried and his colleagues lists numerous failings by Friedberg. Among the claims are that he:
- “was instrumental in perpetuating its nefarious activities, in part by helping to cover up any indications that the FTX scheme was unraveling.
- “was tasked with monitoring customer protection practices, ensuring product offerings complied with existing rules and overseeing internal audits and reviews. He did none of this.”
The lawsuit then includes the Ultimate Bet failings and treachery described above, then continues:
- “Veteran short seller Marc Cohodes ... had noted the potential conflicts of hiring someone connected to a cheating scandal to oversee compliance at the $32 billion FTX exchange.”
- “... Friedberg in his role as Chief Compliance Officer oversaw both FTX and Alameda, which had its own “god mode,” i.e., Alameda was secretly exempted from FTX’s auto-liquidation protocols.
- “ Friedberg’s penchant for duplicity to make legal problems vanish for his corporate paymasters didn’t end with UB’s demise,” citing Dave Mastrianni’s “pump and dump” claims
- “... the Federal Deposit Insurance Corporation (FDIC) sent a letter to Friedberg ... to “cease and desist” using marketing language that could have been erroneously interpreted as saying that exchange users accounts were ensured by the federal banking regulator.”
The class-action lawsuits may be the least of Friedberg and his FTX colleagues’ troubles, with federal prosecutors probing their actions amid multiple claims of illicit activities.
At what point, if any, Friedberg will actually be brought to task for his predatory behaviour over the past two decades remains to be seen.