Notorious UltimateBet Lawyer Dan Friedberg Potentially Implicated in FTX Investigation

Lawyer Dan Friedberg, whose reputation was tarnished in online poker’s biggest scandal over a decade ago, may also be implicated in deceptions carried out by failed cryptocurrency exchange FTX. Friedberg worked for UltimateBet during its super-user cheating scandal and subsequent implosion and was caught on tape assisting Russ Hamilton in his attempts to salvage the situation. More recently, he served as Compliance Officer for FTX, a connection that only fully caught the poker world’s attention after the company declared bankruptcy in November 2021.

As FTX’s former CEO, Sam Bankman-Fried, awaits trial for fraud and other charges, the company’s new chief executive, John J. Ray III, is leading an investigation and attempting to recoup as much investor money as possible. The latest interim report, filed by Ray on June 26, details the involvement of “a senior FTX Group attorney” in deceptions allegedly carried out by the company’s leadership.

The report’s summary introduction reads, in part:

From the inception of the exchange, the FTX Group commingled customer deposits and corporate funds, and misused them with abandon […]

The FTX Senior Executives did not commingle and misuse customer deposits by accident. Commingling and misuse occurred at their direction, and by their design. Bankman- Fried, with the assistance of a senior FTX Group attorney (“Attorney-1”) and others, lied to banks and auditors, executed false documents, and moved the FTX Group from jurisdiction to jurisdiction[…] to enable and avoid detection of their wrongdoing.

Meanwhile, the Wall Street Journal writes that it has confirmation from “people familiar with the matter” that “Attorney-1” is Friedberg. For instance, the report references Attorney-1 paying a $1 million bonus to a lawyer and former government official in the Bahamas. WSJ’s source stated that it was Friedberg who made this payment.

The Financial Times has also suggested that the founders of cryptocasino Stake (who are also behind the gambling-friendly streaming site Kick) consulted with Friedberg for their project. However, Stake has denied any connection to him.

FTX’s Implosion in a Nutshell

Bankman-Fried was a founder and the CEO of cryptocurrency trading firm Alameda Research as well as FTX, a cryptocurrency exchange. In principle, the two were separate ventures.

However, Bankman-Fried and the other leaders at FTX found banks reluctant to facilitate transactions with an unregulated exchange. According to Ray’s report, they began using accounts to receive customer deposits and fund withdrawals. Initially, these were accounts in Alameda’s name, though the report says the scheme expanded to include newly founded companies: North Dimension and FTX Digital Markets (FTXDM).

Per the report, North Dimension was nothing more than a shell company. Meanwhile, FTXDM was incorporated in the Bahamas as a way to move the company’s base of operations in response to regulatory changes.

It states:

To evade banks’ restrictions, at the direction of the FTX Senior Executives, FTX Group funneled customer deposits and withdrawals in fiat currency through bank accounts of Alameda Research Ltd. (“Alameda”) and other affiliates, and made misrepresentations to banks about the purpose for which it was using the accounts. At the same time, also at the FTX Senior Executives’ direction, the FTX Group used those accounts for many other purposes, commingling and misusing vast sums of customer and corporate funds in the process.

Eventually, the conflicts of interest between Alameda Research and FTX came to light in an article at CoinDesk. Another cryptocurrency exchange, Binance, then announced it would sell off its supply of FTT, the exchange token used by FTX. That, in turn, led to a flood of customer withdrawals that FTX did not have sufficient funds to cover.

FTX went bankrupt, taking many customer account balances with it. Ray was brought in to lead the company’s restructuring and return as much money to those customers as possible. As well as the criminal charges against Bankman-Fried and co-CEO Caroline Ellison, the collapse has sparked a flurry of litigation. This has spread to include celebrities and influencers who promoted FTX, such as former NBA player and current WynnBet ambassador Shaquille O’Neal.

Report Claims ‘Attorney-1’ Facilitated Deception

One six-page section of the 38-page interim report is dedicated to Attorney-1’s purported role in the charade. Broadly, the allegations include:

  • Advising FTX leaders on their alleged deception and directing employees to lie to financial institutions and auditors,
  • Creating fake contracts between the companies Bankman-Fried controlled to justify the movement of funds,
  • Assisting FTX leaders in relocating the company to the Bahamas to avoid regulation in Hong Kong (despite the company’s public pro-regulation posturing),
  • Creating and backdating bogus contracts between the various companies controlled by Bankman-Fried and FTX to justify the money moving between them,
  • Helping to incorporate North Dimension and falsely portray it as an operational cryptocurrency trading business,
  • Firing a junior attorney who noticed suspicious activity and raised those concerns.

The report provides several concrete examples of this alleged behavior. For instance, the explanation of the firing of the junior attorney comprises several distinct instances of alleged wrongdoing:

In early 2022, an FTX Group attorney observed a lack of internal documentation and record keeping regarding the FTX Group’s corporate organization and intercompany relationships. In the course of investigating, the attorney learned that Alameda owned North Dimension, and that the FTX Group was using North Dimension accounts to fund FTX exchange customers’ withdrawals. The attorney began asking questions about this practice, as he understood that Alameda was a proprietary trading firm that was not involved in handling exchange customer funds, and that it did not have a license to act as a money services business.

Attorney-1 responded by calling the attorney and asking him to meet in person the same day, a Saturday. When the attorney arrived to the meeting as requested, Attorney-1 fired him […]

This incident occurred just weeks after Bankman-Fried provided false information to a U.S. Senate committee that the FTX exchanges secured assets deposited by customers, ensured sufficient liquid resources to meet customer withdrawal requests, and maintained appropriate recordkeeping and disclosures to protect against misuse or misallocation of assets. The Debtors [i.e. FTX and affiliates under Ray’s guidance] have identified on Attorney-1’s hard drive a final copy of the false written testimony that Bankman-Fried provided to Congress.

The poker community and cryptocurrency community overlap heavily. Nonetheless, Friedberg’s involvement with FTX seemed to have gone unnoticed until early-to-mid 2022. Even then, it failed to cause much alarm until the company’s collapse was underway. In November 2022, as FTX went under, covered this link between it and Ultimate Bet at great length.

Parallels Between the FTX Collapse and Poker’s Black Friday

We might eventually get confirmation of the WSJ’s claim that Attorney-1 is Friedberg. That could come by way of criminal charges against him or revelations stemming from the ongoing FTX litigation. But whatever his role or lack thereof, there are plenty of other parallels between what happened to FTX and what transpired with Ultimate Bet and the affiliated Absolute Poker between 2007 and 2011.

The most important of these is the lack of regulation and consequent failure to segregate user funds properly from other corporate accounts.

Nothing gets the poker community as riled up as cheating. So Ultimate Bet’s infamy is forever connected to the 2007 “super user” scandal in which Hamilton stole millions – perhaps tens of millions – from players. In 2013, Hamilton’s former assistant Travis Makar released a secret recording in which Hamilton admits the whole thing. Friedberg was also a part of that conversation, helping Hamilton figure out how to deal with the fallout.

However, even more money was lost by Ultimate Bet and Absolute Poker players during the events of “Black Friday” in 2011. When the US Department of Justice shut down offshore poker sites, those that hadn’t kept player funds separate from operating capital were unable to reimburse deposits. That included Absolute Poker and Ultimate Bet, as well as Full Tilt. Of the major sites, only PokerStars came out on the other side intact and made its players (and those of Full Tilt) whole.

Only Regulatory Oversight Guarantees Account Safety

Segregation of funds is perhaps the most crucial benefit of a well-regulated market, whether we’re talking about online gambling or cryptocurrency exchanges. Companies that dip into user accounts tend to leave those users in the lurch as soon as they find themselves in financial or legal difficulty.

All legal US online gambling sites are required to keep user balances in separate accounts. The FTX scandal shows us that, absent such oversight, promises of segregated balances are meaningless. FTX told users it held all deposits in special FBO (“for benefit of”) accounts.

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Instead, Bankman-Fried and his colleagues allegedly spent much of that money to help FTX and enrich themselves. The latest interim report states that user deposits went to such things as:

  • Political and charitable donations,
  • Venture investments and acquisitions, and
  • Real estate in the Bahamas

The full scope of the scheme remains under investigation by Ray and his team. However, even what they’ve discovered so far shows that FTX and Almeda were shuffling money between dozens of accounts.

Explaining all those movements in words would have been too complicated for the report, let alone this article. Instead, the report includes a diagram of those the investigation has uncovered so far. We’ll end with that as a visual illustration of what can happen to users’ money in the absence of regulatory oversight:

The second interim report of John J. Ray III includes a diagram of the convoluted financial shell game played by FTX with user deposits.
Source: Second Interim Report of John J. Ray III to the Independent Directors: The Commingling and Misuse of Customer Deposits at


About the Author

Alex Weldon

Alex Weldon

Alex Weldon is an online gambling industry analyst with nearly ten years of experience. He currently serves as Casino News Managing Editor for, part of the Catena Media Network. Other gambling news sites he has contributed to include PlayUSA and Online Poker Report, and his writing has been cited in The Atlantic.
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