FTX paid $25m to whistleblowers before bankruptcy

FTX paid $25m to whistleblowers before bankruptcy
FTX settled with several whistleblowers prior to its collapse in 2022. Credit: Shutterstock / Sergei Elagin
  • An independent, court-appointed lawyer released a 300-page report on the collapse of FTX.
  • He found that FTX paid a total of $25 million to settle seven whistleblower complaints.

Before its spectacular collapse in November 2022, crypto exchange FTX paid seven whistleblowers a combined $25 million to settle complaints alleging “systemic improprieties.”

Among other things, the whistleblowers alleged market manipulation, insider trading, commingling customer and company funds, and flouting regulations and anti-money laundering measures.

That’s according to an independent examiner appointed by the court overseeing FTX’s bankruptcy. The examiner, former prosecutor Robert Cleary, was tasked with reviewing the myriad investigations into FTX’s collapse and certain other matters.

Cleary’s almost 300-page report was made public on Thursday, more than two months after his appointment.

The examiner’s report is the latest to shed light on the breadth of fraud at FTX.

To date, only one person — founder and former CEO Sam Bankman-Fried — has been jailed in connection with the multibillion-dollar fraud that led to the exchange’s collapse.

Members of Bankman-Fried’s inner circle have pleaded guilty to fraud and other charges, but are expected to receive relatively light sentences after cooperating with prosecutors in Bankman-Fried’s trial.

Drawing on its review of an investigation by law firm Quinn Emanuel Urquhart & Sullivan, the examiner’s report suggests that knowledge of fraud at FTX went beyond Bankman-Fried and a tiny group of trusted advisers.

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Quinn Emanuel was hired after FTX’s bankruptcy to determine whether attorneys at Sullivan & Cromwell knew about the fraud. Quinn Emanuel found no evidence that Sullivan & Cromwell, which advised FTX both prior to and after it filed for bankruptcy, had been aware of the fraud.

But it did find that in-house attorneys had helped to pay off several whistleblowers.

The whistleblowers included at least three former employees at FTX’s US arm — including one executive — and an attorney at Alameda Research, the trading firm founded by Bankman-Fried.


The unidentified executive “claimed that the FTX Group misled regulators and investors and lacked adequate corporate structure” — allegations he detailed in a letter to Bankman-Fried, Chief Technology Officer Nishad Singh, and in-house attorney Dan Friedberg, according to the examiner.

The executive ultimately resigned in September 2022 “and agreed to a settlement worth more than $16 million.”

Former FTX.US CEO Brett Harrison, who resigned in September 2022, addressed the examiner’s report on social media.

“I was not paid $16M and I didn’t enter into any ‘settlement’ apart from my exit agreement,” Harrison wrote.

“The concerns I raised and that are referenced in this report pertained to the management of the company and its ability to meet its representations to investors, given the deep organizational dysfunction I witnessed, not criminal activity.”

In another post, Harrison said it was likely the examiner had converted his post-resignation equity stake to $16 million.

“Even if the equity hadn’t become worthless in November 2022, I wouldn’t have been permitted to sell it on the secondary market until the end of December due to the SEC-mandated cooling-off period for executives,” he said.

FTX settled another whistleblower complaint for $1.8 million after the employee, who’d been hired only two months earlier at an annual salary of $200,000, alleged market manipulation and insider trading, according to the examiner.

An attorney at Alameda was fired after just three months when they “raised concerns about regulatory and governance issues at Alameda and Alameda’s handling of customer funds without a money transmitting license.” That complaint was settled for $2 million.

An employee “hired to work on anti-money laundering compliance” was fired three months into the job after claiming FTX.US “lacked sufficient anti-money laundering controls and compliance measures.”

Aleks Gilbert is a DeFi correspondent based in New York. Have a tip? You can contact him at aleks@dlnews.com.

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