FTX’s ex-chief regulatory officer was tied to the online poker scandal

The top “regulatory officer” at the fallen crypto exchange FTX was embroiled in a notorious online poker cheating scandal more than a decade ago – and was caught on tape allegedly aiding the perpetrators of the fraud, according to reports.

Dan Friedberg – a lawyer who was the chief regulatory officer of FTX in the months leading up to its collapse and who also acted as its general counsel – has also been a lawyer for UltimateBet, whose collapse is considered one of The biggest online gambling scandal in the history of that time.

In the alleged scheme – which is rumored claimed actor Ben Affleck among his victims – employees between 2005 and 2008 were accused of using exploit software dubbed “God’s mode” to bilk players out of anywhere between $20 million and above $50 million.

The scandal attracted a lot of coverage CBS News “60 Minutes” and made a cult documentary called “UltimateBeat: Too Lost.”

Friedberg, who reportedly resigned from the FTX company earlier this month when it filed for bankruptcy, seems to have since polish his LinkedIn account, which now displays the message “this page does not exist”. An online bios for Friedberg says he joined FTX after working at the Seattle-based law firm Fenwick & West, where he payment system practice chairman.

FTX, meanwhile, has taken down an “about” page that lists short bios for its top executives, including disgraced ex-CEO Sam Bankman-Fried, FTX co-founder Gary Wang and Friedberg, as well as links to their LinkedIn pages.

The UltimateBet scandal arose after it was revealed that some of the site’s employees were using software to spy on opponents’ cards online during a hand and bet accordingly.

In 2008, the Kahnawake Gaming Commission, the Canada-based regulatory body that licensed UltimateBet, said it “found clear and convincing evidence” that Russ Hamilton, an UltimateBet co-owner and consultant, “was the main person responsible” for the scam, along with a handful of accomplices. .

Friedberg’s involvement surfaced after recording his conversation with the top brass of our poker site was leaked to the public in 2013. The recording was taken during a meeting in early 2008 between Hamilton, Friedberg and other executives and was reportedly leaked by Travis Makar, Hamilton’s longtime assistant.

Friedberg can be heard on tape discussing how UltimateBet should respond and handle media inquiries. Friedberg also advised company executives on strategies to limit payouts to victims by putting the scheme on hold.

Dan Friedberg
Dan Friedberg was FTX’s regulatory officer.

“I think, for the public, it should just be, ‘A former corporate consultant profited from a server flaw by hacking into clients, unable to identify exactly when,'” Friedberg allegedly said on tape, directing the script. in a bid to shortchange the victim of fraud.

Friedberg even asked Hamilton to admit that he was also a victim of the scandal because “otherwise it wouldn’t fly.” He admitted on tape that liquidators for Excapsa, the software firm that owns UltimateBet, had $47 million in potential payouts – but executives wanted to limit the amount to no more than $5 million.

“If we can get it down to five, I’ll be happy,” Friedberg added of the potential payout.

At one point in the recording, Hamilton admitted his mistake while directly addressing Friedberg.

UltimateBet
UltimateBet players reportedly bilked out of $20 million or more.

“I took this money and I’m not trying to fix it, Dan, so we’ve got to get rid of it right away, real quick,” Hamilton said.

The records were widely covered by poker media outlets when they first appeared, including poker newsthingumajig point out the connection between FTX, Friedberg and the UltimateBet scandal last week. Poker.org also posted a retrospective on Friedberg’s UltimateBet saga – and speculate about possible parallels with FTX.

“Friedberg will almost certainly serve an important legal and functional role in finding ways to make FTX’s services and structures look legitimate in the eyes of financial regulators around the world,” Poker.org’s Haley Hintze. wrote last week.

The Post could not immediately determine whether Friedberg had any disciplinary action over his involvement with UltimateBet. A Daniel S. Friedberg with expertise in banking and securities is still listed as eligible to practice law on the Washington State Bar Association’s website.

In its 2008 segment, “60 Minutes” reported that “jurisdictional issues” had prevented any criminal charges from being filed against Hamilton or others involved in the scandal. The audio tapes revealing Friedberg’s involvement did not surface until years after the Kahnawake Gaming Commission released its findings.

Bankman-Fried allegedly diverted $10 billion in FTX client funds to help Alameda Research, a cryptocurrency trading house he also owns. At least $1 billion of that fund is still missing.

In a court filing on Thursday, FTX’s new CEO John Ray III, slammed what he described as a complete lack of regulatory guardrails in the company’s oversight of the platform under the previous leadership – and said the situation was worse than what he encountered while steering the humble energy firm. Enron went through bankruptcy.

UltimateBet
Dan Friedberg asked UltimateBet executives about how to respond to the scandal.

“Never in my career have I seen such a complete failure of corporate control and complete absence of reliable financial information as occurred here,” Ray said in the filing.

Long ago Friedberg raised alarm bells in the cryptocurrency sector long before the decline of FTX. In August 2021, cryptocurrency news site CoinGeek noted that FTX’s decision to tap Friedberg as its chief regulatory officer was “almost inappropriate” because of his past.

CoinGeek’s Steven Stradbrooke noted that it “remains a mystery” how Friedberg “managed to avoid being blocked” after the recording surfaced.

Sam Bankman-Fried
Sam Bankman-Fried is the disgraced ex-CEO of FTX.
through Reuters

“Having Friedberg on the payroll of FTX means that Sam Bankman-Fried (SBF) either didn’t do his due diligence before hiring, or he knows about Friedberg’s past sins and doesn’t care. Neither option paints Sam Bankman-Fried in an overly flattering light,” wrote Stradbrooke .

Elsewhere, short-seller Marc Cohodes pointed out Friedberg’s involvement in predicting FTX’s decline during a September 3rd appearance at the Hedgeye Investing Summit – two full months before the platform collapsed.

At the time, Cohodes, who has a reputation for exposing fraud, said FTX was “dirty and rotten to the core”.

“If you press up Dan Friedberg’s LinkedIn, there is no mention of his time on the poker site, no mention of it, yet he is the chief f-king of the regulatory officer of FTX, which is a f-king of a big job,” said Cohodes. .

“Either FTX knew they hired a chief regulatory officer who was part of the card-cheating scandal, either they knew it, or he covered it up and got hired,” added Cohodes.

The Post has reached out to Friedberg, Bankman-Fried and FTX for comment.

So far, Friedberg has been quiet about what happened at FTX despite his large role in the company’s oversight. A mention of his involvement surfaced recent Wall Street Journal articleThe quoted friend who had dinner with Friedberg the day of his resignation.

The source said that Friedberg “appeared shaken” during the meal and that FTX’s ex-lawyer had shown them a text message he had sent to Bankman-Fried, which read, “One day I hope I can forgive you.”

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