Friedberg is suspected of misusing company funds, creating corporate entities and sham agreements to cover up the abuses, and suppressing whistleblower complaints.
FTX’s current leadership has sued the company’s former compliance officer, Daniel Friedberg, as revealed in a court filing on June 27.
Friedberg suspected of breach of duty
The filing broadly alleges that Friedberg, who previously served as FTX’s chief compliance officer, Alameda Research’s general counsel and other internal and external positions, breached his fiduciary duties and engaged in misconduct.
Crucially, FTX claims that Friedberg caused the waste of company assets and helped former FTX CEO Sam Bankman-Fried and other executives move funds.
Specifically, FTX said Friedberg created an entity called North Dimension to commingle and misappropriate funds. It also claimed that when the planned initial public offering needed an audit, Friedberg created a “fake” intercompany agreement to hide the transfers.
Friedberg is also accused of “whitewashing” or covering up whistleblower complaints about misuse and commingling of funds at the company. Friedberg allegedly fired one whistleblower and paid him severance.
Additionally, Friedberg facilitated billions of dollars in transfers to FTX executives, describing those transfers as company loans. In fact, the alleged loans were not repaid and could not be repaid, according to the filing.
In one of the sections, FTX claims that the early-stage company was “insolvent at all relevant times” and was “built on a house of cards” from its inception. FTX claims Friedberg was behind a scheme to defraud and hinder customers.
FTX seeks fines and damages
FTX, under its current management, is seeking various penalties, damages, and disgorgement from Friedberg, as well as the return of certain property with interest in an amount to be determined at a future trial.
FTX filed the charges as part of the company’s ongoing bankruptcy proceedings in the U.S. Bankruptcy Court for the District of Delaware.
Other recent reports indicate that FTX is attempting to restart operations under its current leadership. The company owes users $8.7 billion, much of which has been recovered despite having been lost or misappropriated in the past.