The FTX Group, led by Sam Bankman-Fried (SBF), allegedly paid over $25 million in hush money to seven whistleblowers prior to the cryptocurrency exchange’s collapse in November 2022. An independent examiner, Robert Cleary, revealed in a report that the settlements were made to address various improprieties within the company, with most of the money going to five of the whistleblowers who raised allegations of systemic issues. The report also found that FTX Group failed to properly investigate the whistleblowers’ claims and instead opted to settle for significant amounts, with attorney Daniel Friedberg handling the majority of the resolutions.
One whistleblower, known as Whistleblower-4, accused the crypto exchange of misleading regulators and investors and lacking proper corporate structure in a letter to Bankman-Fried and other executives. Despite being advised against it, the whistleblower ultimately agreed to a $16 million settlement just two months before the exchange collapsed. Another whistleblower, who was an attorney for FTX’s sister company Alameda Research, was terminated after raising concerns about regulatory and governance issues. This whistleblower received a $2 million settlement despite working for less than three months at the company.
A third whistleblower, who had worked for FTX.US for only two months, was granted a $1.8 million settlement after raising concerns about market manipulation and insider trading. The report sheds light on Bankman-Fried’s alleged attempts to cover up his crimes leading up to FTX’s collapse. It comes ahead of the sentencing of former FTX executive Ryan Salame, who is facing criminal charges related to his role at the exchange. Salame is the first FTX executive apart from Bankman-Fried to be sentenced, with Bankman-Fried currently serving a 25-year sentence for orchestrating a multi-billion dollar fraud.
The revelations from the report highlight the lengths to which Bankman-Fried allegedly went to silence whistleblowers and maintain the facade of FTX’s operations. The settlements paid to these whistleblowers suggest a pattern of wrongdoing within the company that was swept under the rug in exchange for large sums of money. The report raises questions about the culture of silence and cover-up at FTX Group and underscores the importance of whistleblower protection in holding companies and executives accountable for their actions.
As the fallout from FTX’s collapse continues to unfold, it remains to be seen how these revelations will impact the future of the cryptocurrency exchange industry and the regulatory landscape surrounding it. The case serves as a cautionary tale of what can happen when whistleblowers are silenced and misconduct is allowed to go unchecked within organizations. Moving forward, it is crucial for regulators and industry participants to prioritize transparency, accountability, and ethical behavior to prevent similar incidents from occurring in the future.
