Good morning. Shawn Tully here with a new twist in the legal battles engulfing the crypto world. A series of class action cases have pitted Moskowitz Law of Florida and Boies Shiller Flexner (home of super-lawyer David Boies) against a panoply of celebrities who touted crypto. The lawyers are trying to recoup billions on behalf of regular people who bought crypto and lost big. Yesterday there was a new wrinkle in the case; as Fortune was first to report:
Dan Friedberg, the former chief compliance officer of bankrupt crypto exchange FTX, is cooperating with the plaintiffs bringing a class action suit versus a group of sports stars and entertainers, Fortune has learned from a new legal filing. The lawsuit's targets include, among others, Shaquille O’Neal, Tom Brady, Naomi Osaka, and Larry David.
Friedberg’s role in assisting the plaintiffs was disclosed in an amended complaint in the case, filed late in the afternoon of May 11 in Federal Court in the Southern District of Florida. The complaint alleges that important promotional activity originated from Florida, which could be an important issue in the case. That evidence could be especially relevant on the pending jurisdictional issues.
The filing is full of fascinating details about how Friedberg first met FTX’s Sam Bankman-Fried, and eventually turned on the founder:
In the declaration, Friedberg explains that he was introduced to Sam Bankman-Fried by his father, Sam Bankman, a tax law professor at Stanford Law School. He represented SBF as outside counsel after the founder left Jane Street to start FTX in 2017. When SBF launched FTX.US in 2020, Friedberg joined full time as chief compliance officer. In that role, he oversaw a dozen attorneys and supervised three general counsels working respectively for FTX International, FTX.US, and the captive hedge fund, Alameda. Friedberg stated that on Nov. 9, 2022, he received a call from the GC of FTX International saying that FTX faced an $8 billion deficit. Friedberg claims he’d believed that clients funds “were backed one to one” and was totally blindsided. He says that he resigned the next day because “I no longer trusted Sam, Gary [Wang], and Nishad [Singh].”
It was previously reported that Friedberg is aiding the Justice Department's case against Bankman-Fried, and no question this is a big win for the lawyers trying to prove wrongdoing on the part of the celeb endorsers. For their part, the firms representing the defendants including Latham & Watkins and Colson Hicks Eidson of Coral Gables, Fla., have maintained that the suit should be dismissed because their clients made only generally favorable comments about FTX in their advertisements, didn’t mention the accounts that the plaintiffs claim are unregistered securities, and some also say the suit has no “personal jurisdiction” over the non-resident defendants.
As for Friedberg, the plan is for the “class” to drop all claims against him in exchange for his cooperation. We’ll see how this all plays out in court. But in the meantime, don’t expect to see any celebrities touting crypto anytime soon.
You can read the full story on Friedberg here.
Have a great weekend,
Shawn Tully
Email: shawn.tully@fortune.com
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