FTX Lawyer Was Key Figure in Notorious UltimateBet Poker Cheating Scandal
The chief regulatory officer of disgraced crypto exchange FTX and its one-time general counsel, Dan Friedberg, have history. The Seattle Wash.-based lawyer was a key figure in one of poker’s most notorious cheating scandals.
FTX, formerly one of the world’s biggest crypto exchanges, collapsed spectacularly earlier this month. That was after documents leaked to crypto news site CoinDesk suggested that the group’s hedge fund, Alameda, was using FTX’s FTT token to make risky loans. The revelation prompted a major sell-off of FTT by Binance, sparking a domino effect.
FTX could not cope with the run on its exchange, because Alameda had traded and lost $8 billion of FTX customer funds.
Friedberg resigned from FTX earlier this month, just as the shit hit the fan.
But back in 2008, when bitcoin was still just a fledgling fringe experiment, there was another tale of corporate malfeasance doing the rounds, and Friedberg was involved in that one, too.
The UltimateBet (UB) cheating scandal was perhaps the darkest chapter in the history of online poker, and it has some contenders.
It was unearthed by players themselves, who suspected the existence of a so-called “God-Mode,” or “super-user” account built into the UB software. This allowed users to play while viewing opponents’ hole cards, they theorized, and they shared their evidence online.
In a February 2008 statement, UB confirmed the existence of the account, known as AuditMonster2. The company claimed the cheating had been perpetrated by employees of the former owner, Excapsa Software, and it had deleted the account.
On September 29, 2008, UB’s regulator, the Kahnawake Gaming Commission, said it had “found clear and convincing evidence” that Russ Hamilton, a UB shareholder and former World Series of Poker champion, “was the main person responsible” for the cheating,
Hamilton and other UB employees had bilked poker players out of an estimated $20 million.
Caught on Tape
In 2013, audiotapes were leaked by Hamilton’s longtime assistant, Travis Makar, to the 2+2 poker forums. They purportedly recorded Hamilton, Friedberg, and other UB execs discussing damage limitation as the scandal broke in early 2008.
“I think, for the public, it just has to be, ‘former consultant to the company took advantage of a server flaw by hacking into the client, unable to identify exactly when,’” Friedberg allegedly said on the tape, as those present at the meeting discussed how to avoid repaying the full amount to victims.
Friedberg suggested Hamilton should claim he was also a victim of the scandal because “otherwise it’s not going to fly.” Friedberg also said he wanted to get the 20 million liability “down to five.”
“I did take this money and I’m not trying to make it right, Dan, so we gotta get that out of the way right away, real quick,” Hamilton said.
Hamilton and others involved in the UB scandal escaped prosecution because of jurisdictional issues, and Friedberg was never disbarred.
Members of its sister site, Absolute Poker, were indicted by the US Department of Justice in 2011 on charges of bank fraud and money laundering.
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