Bankrupt cryptocurrency exchange FTX is reportedly seeking to recover $460 million in allegedly misused customer assets from venture capital firm Modulo Capital.
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
On March 22, 2023, FTX filed settlement documents stating that Sam Bankman-Fried, FTX’s former CEO, directed Alameda Research to invest $475 million in Modulo through several transfers that began in May 2022. Alameda transferred the amount mentioned earlier to Modulo in exchange for 20% of Modulo’s Class A shares. According to the filing, Alameda and Modulo entered a limited partnership agreement on June 16, 2022.
According to the settlement agreement, Modulo agreed to pay FTX $404 million in cash and waive its claim to $56 million worth of assets held on the crypto exchange. This represents around 97% of FTX’s initial investment in Modulo. Alameda Research would also give up its claim to its Modulo shares as part of the settlement.
The settlement agreement still needs approval from United States Bankruptcy Judge John Dorsey, with a motion hearing scheduled for April 12.
Although the $460 million settlement would be a significant victory for FTX’s creditors, it represents less than 7% of the current deficit. As of March 17, 2023, FTX stated that claims against the company amounted to over $11 billion, while its assets totaled only $4.7 billion, resulting in a shortfall of around $7 billion.
Modulo Capital was founded in March 2022 by three former executives of Jane Street, a New York-based organization that had previously employed Sam Bankman-Fried, and Caroline Ellison, the former CEO of Alameda Research.
There have been speculations that Bankman-Fried’s decision to invest in the relatively unknown venture capital firm may have been influenced by his alleged romantic relationship with Xiaoyun Lily Zhang, one of its founders.
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
In November 2022, FTX’s CEO Sam Bankman-Fried resigned, and the exchange filed for Chapter 11 Bankruptcy. FTX’s new administrators have been tasked with recovering the exchange’s missing funds. The administrators reported that six former executives, including Bankman-Fried, received $3.2 billion in payouts and loans from FTX-related businesses.
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