Seattle lawyer linked to George Santos and the FTX crypto scandal

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During his run for Congress last year, scandal-ridden Representative George Santos received only a handful of campaign donations from Washington residents.

Seattle attorney Daniel Friedberg was the New York Republican’s biggest contributor, awarding the maximum allowable $5,800 last June to Santos, who just two months after taking office is facing a criminal and ethical investigations into his doctored biography and shady campaign finances.

Friedberg, who practiced law in Washington for more than two decades, is also linked to a larger national scandal, which could help explain his gift of Santos.

Until recently, Friedberg was chief compliance officer for FTX, the collapsed cryptocurrency exchange whose leader, Sam Bankman-Fried, was arrested in the Bahamas in December and charged by federal prosecutors with a massive fraud scheme. fraud and money laundering. Friedberg was not charged.

A class action lawsuit filed in federal court in Florida accuses Friedberg of helping Bankman-Fried cover $8 billion in customer losses at the previously high-flying firm, which abruptly filed for Chapter 11 bankruptcy in november.

While he had hardly ever made political donations before, Friedberg was among several top FTX executives who contributed to the Santos campaign last year, according to Federal Election Commission documents.

How a relatively low-key Seattle attorney, who specialized in online banking and gambling before entering the world of crypto, found himself connected to two of the most talked about stories in business and politics ?

Friedberg doesn’t say much.

In an email this week, he said he donated to Santos on the recommendation of a friend. “Obviously he’s a terrible candidate, but that was unknown to me at the time,” he said.

Friedberg said he had “no further comment” and did not respond to questions about his role at FTX. A man who answered the door to his Queen Anne home and office this week said Friedberg was not there and was unavailable to speak to a reporter.

Although it never made local headlines, this was not Friedberg’s first brush with controversy. In 2008, he worked for an online poker company that went bankrupt after being embroiled in a cheating scandal.

Friedberg reportedly cooperated with federal prosecutors investigating FTX and Alameda Research, the crypto hedge fund also founded by Bankman-Fried. According to a Reuters report, Friedberg met in November with two dozen investigators at the U.S. Attorney’s Office for the Southern District of New York.

However, Friedberg is among FTX insiders being sued in a class action lawsuit filed on behalf of “thousands, if not millions” of people who purchased cryptocurrency accounts with FTX, according to a lawsuit filed in court. of the US District of the Southern District. from Florida.

The lawsuit accuses FTX of a ‘fraudulent scheme’ that defrauded ‘unsophisticated investors around the world’, luring them with false promises of profit and security, before collapsing in a Ponzi scheme like a house of .

In addition to Bankman-Fried, Friedberg and four other FTX executives, the lawsuit names as defendants several celebrity endorsers who have publicly promoted the cryptocurrency company in advertisements, including NFL quarterback Tom Brady, L. former NBA star Shaquille O’Neal and actor and comedian Larry David. .

An amended complaint filed in the Florida lawsuit last month alleges that Friedberg “contributed to perpetrating [FTX’s] nefarious activities, in part by helping to conceal any indication that the FTX program was collapsing.

As FTX’s chief regulatory officer, Friedberg “was responsible for overseeing client protection practices, ensuring product offerings complied with existing rules, and overseeing internal audits and reviews.” He did none of that,” the complaint states.

Friedberg, in a recent legal filing, presented himself as oblivious to any fraud within the company and said he was also a victim, having lost hundreds of thousands of dollars in crypto assets.

The statement, filed last month in FTX’s bankruptcy filing, sheds light on how Friedberg became involved in the company, while blaming other insiders for allegedly covering up his precarious financial situation.

Friedberg wrote that he was introduced to Bankman-Fried by the father of FTX founder Joseph Bankman, a prominent professor of tax law at Stanford University.

Friedberg, 52, has been licensed to practice law in Washington since 1998. He has specialized in financial regulatory matters for clients including banks, online gaming companies and mobile payment providers, according to a online biography. The state bar association’s legal directory does not list any disciplinary action against him.

Friedberg joined FTX in March 2020 from the Seattle office of Fenwick & West, where he led the law firm’s cryptocurrency practice.

While at Fenwick, Friedberg vouched for Bankman-Fried to at least one potential lender at a time when FTX was seeking investors, dangling promises of 20% annual returns, according to the Wall Street Journal.

We know the owner of Alameda and consider him the highest reputation in the industry, Friedberg wrote to the potential lender on Fenwick & West letterhead, the WSJ reported.

Founded in 2019, FTX, largely run by 20-somethings, seemed to be rolling in the dough within a few years, attracting a million investors to its crypto exchange, mining celebrity endorsements and running a famous Super Bowl ad. 2022.

But now Bankman-Fried is under house arrest in California on a $250 million bond signed by his parents, as he awaits trial on charges of looting clients’ deposits to make risky investments, purchase goods and make political donations. He pleaded not guilty.

Friedberg, in his statement, said he was blindsided by the company’s sudden implosion. He said “certain FTX staff” in the Bahamas were made aware of approximately $8 billion in missing investor money on Nov. 7.

Another attorney for FTX reached out to him on a Zoom call “to let me know about this shocking development,” Friedberg recalled. Prior to the disclosure, “I had no idea of ​​any client shortfalls,” he said, adding that it was not his job to monitor FTX’s financial reserves.

“I relied on the executives, finance team and auditors, and believed the client assets were fully funded,” he wrote.

Friedberg said he resigned the next day after learning that other FTX executives and lawyers knew about the $8 billion shortfall, with one telling him he was calling “all billionaires he knew” to try to secure emergency funding.

Friedberg said he lost personal investments in the FTX collapse, citing more than $500,000 in bitcoin and $400,000 in Solana, another cryptocurrency, which he placed in FTX accounts that didn’t are more accessible.

political donation

Friedberg’s Don Santos stands out because he almost never gave to political candidates. In state and local races, his only recorded donation was a $225 check to Seattle Mayor Mike McGinn’s 2013 re-election campaign. McGinn said last week he could not remember Friedberg .

In addition to Santos, Friedberg gave $2,900 last June to another Republican congressional candidate in New York: Michelle Bond, a Donald Trump-endorsed crypto lawyer who lost in the primary. Bond was dating FTX co-CEO Ryan Salame and was paid $400,000 to advise the company. Several other FTX executives also donated to his campaign.

These donations to Republicans contrasted with Bankman-Fried’s large contributions to Democratic candidates. He spent about $40 million on political donations in 2022, making him one of the biggest donors in the country.

Among the recipients were U.S. Senator Patty Murray, U.S. Representative Kim Schrier, D-Sammamish and the Washington State Democratic Party. Murray and Schrier donated the money they received to charities.

poker scandal

Following the fall of FTX, those who follow the online gambling world noted similarities in Friedberg’s previous work for a Canadian software company whose poker platform was exposed in a major cheating scandal.

The company’s Ultimate Bet online poker site was revealed in 2008 to have given an unfair advantage to some players who were able to see the cards held by opponents. The exploit reportedly cost thousands of victims, including actor Ben Affleck, up to $50 million.

Friedberg was recorded in a conversation posted online in 2013 talking with other Ultimate Bet insiders about blaming the scandal on a software hack and downplaying refunds, according to an NBC News investigative report. who said that “Friedberg’s unusual CV raises questions about why he was chosen”. for Key Positions” at FTX.

Gambling regulators have fined Ultimate Bet $1.5 million and ordered refunds of $22 million to affected players, according to PokerNews, a gaming news site that has extensively covered gambling. FTX, Friedberg and Ultimate Bet connections.

After its collapse, the Ultimate Bet website transformed into a crypto site.

Seattle Times News researcher Miyoko Wolf contributed to this report.

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