The top “regulator” of fallen crypto exchange FTX was embroiled in a notorious online poker cheating scandal more than a decade ago – and was reportedly caught on tape allegedly helping the perpetrators of the scam.
Dan Friedberg — an attorney who was FTX’s chief regulatory officer in the months leading up to the collapse and also served as general counsel — also served as counsel for UltimateBet, whose collapse was considered one of the biggest online gambling scandals in history at the time.
The alleged scheme – which reportedly included actor Ben Affleck among its victims – accused employees between 2005 and 2008 of using a software exploit called “God Mode” to steal players between $20 million and more than $50 million to blackmail.
The scandal drew coverage from CBS News’ 60 Minutes and spawned a cult documentary titled UltimateBeat: Too Much To Lose.
Friedberg, who reportedly resigned from FTX earlier this month when it filed for bankruptcy, appears to have since deleted his LinkedIn account, which now shows a “This page doesn’t exist” message. According to online biographies for Friedberg, he joined FTX after working at the Seattle-based law firm Fenwick & West, where he led the payment systems practice.
FTX, meanwhile, removed an “About” page that listed brief bios of its top executives, including disgraced ex-CEO Sam Bankman-Fried, FTX co-founders Gary Wang and Friedberg, along with links to their LinkedIn pages.
The UltimateBet scandal arose after it was revealed that some site employees used the software exploit to peek at online opponents’ cards during hands and bet accordingly.
In 2008, the Kahnawake Gaming Commission, the Canada-based regulator that licensed UltimateBet, said it had “found clear and compelling evidence” that Russ Hamilton, a co-owner and adviser to UltimateBet, was “primarily responsible” for the scam. along with a handful of accomplices.
Friedberg’s involvement surfaced after recordings of his conversations with top poker site leads were leaked in 2013. The recordings were taken during a meeting between Hamilton, Friedberg and other executives in early 2008 and were reportedly leaked by Travis Makar, Hamilton’s longtime assistant.
Friedberg can be heard on tape talking about how UltimateBet should respond and deal with media inquiries. Friedberg also advised company executives on a strategy to limit payouts to victims by withholding the scope of the program.
“I think the public just needs to say, ‘The company’s former consultant exploited a server bug by hacking into the client without being able to determine exactly when,'” Friedberg allegedly said on the tape, dictating a script to take advantage of the victims of the scam.
Friedberg even advised Hamilton to claim he was also a victim of the scandal because “otherwise it’s not going to work out.” He admitted on tape that the bankruptcy trustee of Excapsa, the software company that owns UltimateBet, had $47 million available for potential withdrawals – but that executives wanted to limit the total to no more than $5 million.
“If we can get it down to five, I’d be happy,” Friedberg added in regards to potential payouts.
At one point in the recording, Hamilton admitted his guilt while addressing Friedberg directly.
“I took that money and I’m not trying to make it up to you, Dan, so we need to get that out of the way right now, real quick,” Hamilton said.
The footage was widely covered by the poker media when it first surfaced, including Poker News last week, which pointed to the connection between FTX, Friedberg and the UltimateBet scandal. Poker.org also published a review of Friedberg’s UltimateBet saga – and speculated about possible parallels to FTX.
“Friedberg almost certainly would have played an important legal and functional role in finding ways to make FTX’s services and structure legitimate in the eyes of financial regulators around the world,” wrote Poker.org’s Haley Hintze last week .
The Post could not immediately determine whether Friedberg had taken any disciplinary action over his involvement with UltimateBet. A Daniel S. Friedberg with expertise in banking and securities is still listed as a licensed attorney on the Washington State Bar Association website.
In its 2008 segment, 60 Minutes reported that “jurisdictional issues” prevented it from filing criminal charges against Hamilton or others involved in the scandal. The tapes revealing Friedberg’s involvement didn’t surface until years after the Kahnawake Gaming Commission’s findings were released.
Bankman-Fried reportedly transferred $10 billion in FTX client funds to support Alameda Research, a cryptocurrency trading house he also owned. At least one billion of these funds are still missing.
In a court filing on Thursday, FTX’s new CEO, John Ray III, criticized what he described as a total lack of regulatory guard rails in corporate oversight on the platform under previous leadership – saying the situation is worse than what he had described of the management of the notorious energy company Enron experienced through its bankruptcy.
“Never in my career have I seen such a complete failure of corporate controls and a complete lack of trustworthy financial information as here,” Ray said in the filing.
Friedberg’s past had alarm bells ringing in the cryptocurrency space long before FTX’s demise. In August 2021, cryptocurrency news site CoinGeek noted that FTX’s decision to appoint Friedberg as chief regulatory officer was “almost comically inappropriate” given his past.
CoinGeek’s Steven Stradbrooke noted that how Friedberg “managed to avoid the ban” “remains kind of a mystery” after the recordings surfaced.
“Friedberg’s presence on FTX’s payroll means that Sam Bankman-Fried (SBF) either failed to do his due diligence prior to hiring, or he knew of Friedberg’s past sins and did not care. Neither option casts an overly flattering light on Sam Bankman-Fried,” Stradbrooke wrote.
Elsewhere, short seller Marc Cohodes pointed to Friedberg’s involvement while predicting FTX’s demise during a Sept. 3 appearance at the Hedgeeye Investing Summit — a full two months before the platform collapsed.
At the time, Cohodes, who has a reputation for detecting scams, argued that FTX was “tainted through and through.”
“If you go to Dan Friedberg’s LinkedIn, there’s no mention of his time on the poker site, there’s no mention of it, but he’s FTX’s chief F—King regulatory officer, which is a hell of a job,” Cohodes said.
“Either FTX knew they hired a chief regulatory officer who was part of a card fraud scandal, either they knew that, or he covered it up and got hired,” Cohodes added.
The Post has reached out to Friedberg, Bankman-Fried and FTX for comment.
So far, Friedberg has remained silent about what is happening at FTX, despite his likely large role in overseeing the company. Mention of his involvement surfaced in a recent Wall Street Journal article citing a friend who had had dinner with Friedberg on the day of his resignation.
The source said Friedberg was “visibly shaken” during dinner and the ex-FTX attorney showed them a text message he allegedly sent to Bankman-Fried that read, “I hope I can be able to tell you one day.” forgive.”