U.S. prosecutors alleged that SBF’s Modulo investment was likely made using misappropriated money from FTX deposits by customers.
Authorities in the United States might have discovered yet another possible component of Sam Bankman-Fried’s cryptocurrency empire.
U.S. federal prosecutors have alleged that Bankman-Fried has used money from FTX exchange to invest in the venture capital (VC) firm Modulo Capital, according to The New York Times.
As previously reported, SBF’s hedge fund and FTX’s sister firm, Alameda Research, invested a total of $400 million in Modulo in 2022, which became one of the most significant investments by SBF. The funding has drawn particular attention from regulators due to Modulo — a relatively unknown firm — raising substantial capital during challenging times for the crypto market.
According to the latest findings by SBF’s investigators, the Modulo investment was likely made using criminal proceeds or misappropriated money that FTX customers had deposited with the exchange.
The prosecutors said that Modulo had become an important part of the investigation. FTX lawyers are now reportedly eyeing Modulo’s assets as they scramble to recover the billions of dollars from repaying their customers, investors and other creditors. So far, the whereabouts of SBF’s $400 million investment are unclear.
Modulo Capital was founded in March 2022 by three former executives at Jane Street, a New York-based firm that once employed Bankman-Fried and Alameda CEO Caroline Ellison. One of the founders, Duncan Rheingans-Yoo, was reportedly only two years out of college. Another Modulo co-founder, Xiaoyun Zhang, known as Lily, was a former Wall Street trader with some ties with SBF. Modulo is also known to run its operations from the same Bahamian condo community where SBF resided.
The news comes amid U.S. commissioner for Commodity Futures Trading Commission, Christy Goldsmith Romero, questioning the due diligence work done by VCs and money managers who funded FTX. “Why did they turn a blind eye to what should have been really flashing red lights?” Romero asked.
Previously, the deputy prime minister of Singapore, admitted that the government-owned investment firm Temasek faced “reputational damage” due to their investment in FTX.