Federal prosecutors are investigating Sam Bankman-Fried’s $400 million investment in hedge fund Modulo Capital, located on the same land as FTX.
Prosecutors are investigating whether Bankman-Fried invested FTX client funds in Modulo Capital while Alameda Research suffered the fallout from the collapses of other crypto firms.
SBF prosecutors look at modulo investment
Prosecutors suspect Bankman-Fried invested in the hedge fund by embezzling funds from FTX clients.
A Bahamian prosecutor revealed his knowledge of the existence of the hedge fund during the Bankman-Fried bail hearing in Nassau, Bahamas, before the former FTX CEO was extradited to the States -United. Bankman-Fried reportedly met Modulo founders Duncan Rheingans-Yoo and Xiaoyun Zhang during his time at quantitative trading firm Jane Street Capital. He then reportedly invested around $300 million in the hedge fund before FTX filed for bankruptcy in November 2022.
Lawyers handling FTX’s bankruptcy case also listed the funds as a potential source of recovering assets from the exchange’s bankruptcy, according to The New York Times.
“Focusing on large and questionable dealings with a fund, company or person with close ties to the debtor prior to filing for bankruptcy is essentially the low hanging fruit in a bankruptcy case,” noted Lindsey Simon, professor of bankruptcy at the University of Georgia.
Bankman-Fried was arrested in the Bahamas in December 2022 after the collapse of FTX, where he allegedly misused client funds to bail out affiliate market maker Alameda Research. Former Alameda Research CEO Caroline Ellison was reportedly against Bankman-Fried’s investment in Modulo.
Bankman-Fried now faces eight criminal charges in the United States, including wire fraud, conspiracy to commit money laundering and political campaign finance violations. Separately, the SEC accused the MIT alum of misusing $1.8 million in investor funds.
Prosecutors close in on former CEO’s assets ahead of October 2023 trial
Official prosecutors are closing in on Sam Bankman-Fried’s assets as they prepare for his October 2023 trial date.
Prosecutors recently seized $50 million from Sam Bankman-Fried’s account at Washington-based Farmington State Bank, where Alameda allegedly invested $11.5 million.
Farmington State Bank is located in Farmington, WA, a town of just 146 people. Prosecutors are also examining three Binance accounts under the name Bankman-Fried.
On Friday, January 20, 2023, officials prosecuting Bankman-Fried seized the FTX co-founder’s shares in online brokerage Robinhood Markets. About three days later, Bankman-Fried listed a townhouse in Washington, D.C. for $3.28 million.
Federal prosecutors’ handling of the Modulo case will likely inform a similar action regarding Bankman-Fried’s other investments, totaling about $4.6 billion. The former billionaire has invested in Bored Ape Yacht Clubs creator Yuga Labs and an artificial intelligence company called Anthropic.
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