An independent examiner’s report has revealed that FTX Group, led by Sam Bankman-Fried (SBF), paid over $25 million in hush money to seven whistleblowers before the collapse of the crypto exchange in November 2022. The report, conducted by Robert Cleary, found that the whistleblowers had alleged various improprieties at FTX Group, with most of the settlement money going to five whistleblowers who raised claims of systemic issues. The whistleblower claims were settled by attorney Daniel Friedberg, with FTX Group failing to investigate the allegations.
One whistleblower, identified as Whistleblower-4, alleged in a letter to Bankman-Fried, Friedberg, and FTX’s head of engineering Nishad Singh that the exchange misled regulators and investors and lacked adequate corporate structure. Friedberg advised Whistleblower-4 against making such claims and suggested that an apology be made to Bankman-Fried. Ultimately, Whistleblower-4 agreed to a $16 million settlement just two months before the exchange’s collapse. Another whistleblower, who worked at FTX’s sister company Alameda Research, was terminated after raising concerns about regulatory and governance issues, receiving a $2 million settlement despite a short tenure.
A third whistleblower, after two months at FTX.US, was granted a $1.8 million settlement for raising concerns about market manipulation and insider trading. These settlements, along with others mentioned in the report, paint a picture of FTX Group’s efforts to silence whistleblowers and avoid investigating their claims. The report also revealed that Bankman-Fried has been sentenced to 25 years in prison for orchestrating a multi-billion dollar fraud and ordered to pay $11 billion in forfeiture. Former FTX executive Ryan Salame is also facing criminal charges and is set to be sentenced on Monday.
The revelations from the independent examiner’s report shed light on the corrupt practices within FTX Group and the lengths Bankman-Fried went to cover up his crimes leading up to the exchange’s collapse. The report indicates that FTX Group failed to take the whistleblowers’ claims seriously and instead opted to settle them for substantial amounts of money. This raises questions about the company’s commitment to transparency and integrity, as well as the implications of these actions for the wider crypto industry. The report underscores the importance of whistleblowers in holding companies and executives accountable for illegal or unethical behavior.
The settlements paid to the whistleblowers, totaling over $25 million, demonstrate the severe nature of the allegations against FTX Group and the level of internal corruption and mismanagement within the organization. The fact that Bankman-Fried is serving a lengthy prison sentence and has been ordered to pay a significant amount in forfeiture further emphasizes the severity of the crimes committed. The report highlights the need for stronger regulatory oversight and enforcement in the crypto industry to prevent similar incidents from occurring in the future. It also underscores the importance of whistleblower protections and the role they play in exposing fraud and misconduct in the corporate world.
