How an Ex-FTX Insider Became the Prosecution's Secret Weapon Against Sam Bankman-Fried

When FTX imploded in November 2022, the collapse of the $32 billion crypto exchange sent shockwaves across the industry. But behind the scenes, a critical piece of the puzzle was already falling into place. Daniel Friedberg, the former lawyer who had advised Bankman-Fried throughout the turbulent rise of FTX, made a choice that would reshape the government’s case against the disgraced entrepreneur.

The Turning Point: Inside Knowledge Meets Legal Strategy

Federal Bureau of Investigation agents knocked on Friedberg’s door just days after the bankruptcy filing. On November 14, 2022, two FBI agents contacted the ex-FTX legal counsel, and remarkably, he agreed to cooperate with authorities. What made this collaboration unique was the delicate negotiation that followed—Friedberg and the bankrupt exchange’s representatives worked out an arrangement to share investigative details while preserving attorney-client privilege boundaries.

By November 22, just over a week after initial contact, Friedberg sat down with a multi-agency team including prosecutors from the Department of Justice, the Securities and Exchange Commission, and the Southern District of New York (SDNY). The meeting proved pivotal. Friedberg provided prosecutors with detailed accounts of how customer funds were systematically diverted to finance Alameda Research, the cryptocurrency trading firm that Bankman-Fried also controlled.

Building the Prosecution’s Case

The intelligence Friedberg shared would ultimately support the eight counts leveled against Bankman-Fried in December 2022. These charges, filed by U.S. Attorney Damian Williams of the SDNY, represented one of the most serious indictments against a crypto executive. The former FTX founder was arrested in the Bahamas and subsequently extradited to Manhattan, facing accusations of wire fraud, conspiracy, and money laundering. He was released on a $250 million bail bond while awaiting trial.

What distinguished Friedberg’s role was that he wouldn’t face criminal charges himself. Instead, authorities indicated he would serve as a key witness for the prosecution—a position that granted him protection while leveraging his intimate knowledge of FTX’s internal operations and decision-making processes.

The Broader Recovery Effort

Beyond the criminal case against Bankman-Fried, authorities have been aggressively pursuing asset recovery. The U.S. Justice Department seized approximately $460 million in Robinhood shares that Bankman-Fried and Gary Wang had purchased during June and July 2022. This seizure came after weeks of competing claims from BlockFi, FTX’s creditors, and other parties vying for stakes in the 56 million shares.

The asset freeze didn’t stop at U.S. borders. The Securities Commission of the Bahamas also locked down $3.5 billion in customer cryptocurrency holdings, further constraining Bankman-Fried’s financial position and strengthening the government’s leverage in prosecuting the case.

Friedberg’s cooperation represents a turning point in how law enforcement pursues complex crypto fraud cases, demonstrating that insider knowledge—paired with carefully negotiated legal agreements—can dismantle even the most sophisticated financial schemes.