The bankrupt cryptocurrency exchange FTX is seeking to recover $460 million of client funds allegedly embezzled from venture capital firm Modulo Capitalwhich received a sizeable investment from Alameda Research last year.
As previously reported, it is understood that Alameda Research – FTX’s sister exchange company – invested around $400 million in Modulo in 2022, in one of the largest investments ever made by FTX under the leadership of SamBankman-Fried.
In a March 22 presentation, FTX asserted that Alameda Research’s investment was made under the direction of Bankman-Fried, and that Alameda invested $475 million in Modulo in a series of transfers beginning in May 2022..
On June 16, Alameda entered into a limited partnership agreement with Modulo, according to the filing, which resulted in Alameda transferring the aforementioned funds to Modulo in exchange for ownership of 20% of Modulo’s Class A shares.
In bankruptcy proceedings, payments made to entities prior to the bankruptcy filing may be recovered and redistributed among creditors. While the recovery period is 90 days for most unsecured creditors, it is one year for “insiders,” a term that includes general partners.
Under the settlement agreement, Modulo has agreed to return $404 million in cash and will forgo claiming $56 million in assets from cryptocurrency exchange FTX, representing almost 97% of FTX’s initial investment.
FTX is settling with Modulo Capital for $460 million.
First big “clawback”. pic.twitter.com/JNHn2bhNLb
— FTX 2.0pium (FTX Creditor) (@AFTXcreditor) March 22, 2023
FTX reaches an agreement with Modulo Capital for USD 460 million. First big clawback. pic.twitter.com/JNHn2bhNLb
The deal would also cause Alameda to lose any right to its Modulo shares..
Modulo Capital was founded in March 2022 by three former executives of Jane Street, a New York-based firm that once employed Bankman-Fried and the former Alameda CEO.Caroline Ellison.
It has also been reported that Bankman-Fried was in a romantic relationship with one of its founders, Xiaoyun “Lily” Zhang, which some have theorized was the motivation behind her drive to invest in the shadowy VC firm..
Bankman-Fried’s girlfriend? Xiaoyun “Lily” Zhang, used to be romantically involved with Bankman-Fried, according to four people familiar with their relationship. her partner, Duncan Rheingans-Yoo, had only graduated from Harvard two years before SBF’s investment. That’s textbook
—9:29 (@GuitarSunCat) January 25, 2023
Bankman-Fried’s girlfriend? Xiaoyun “Lily” Zhang used to be romantically involved with Bankman-Fried, according to four people familiar with her relationship. her partner, Duncan Rheingans-Yoo, had only graduated from Harvard two years prior to the SBF investment. that’s manual
The deal will still have to be confirmed by US bankruptcy judge John Dorsey.; there is a motion hearing set for April 12.
In his last presentation to creditors on March 17, FTX noted that claims against it were over $11 billion, against just $4.7 billion in assets for a total shortfall of nearly $7 billion, so while the $460 million deal would be a big win for creditors, it only represents less than 7% of the current deficit.
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