Federal prosecutors probe Sam Bankman-Fried’s $400 million investment in hedge fund Modulo Capital, located on the same compound as FTX.
The prosecutors are investigating whether Bankman-Fried invested FTX customer funds into Modulo Capital while Alameda Research suffered the fallout of the collapses of other crypto firms.
SBF Prosecutors Eye Modulo Investment
Prosecutors suspect Bankman-Fried invested in the hedge fund through misappropriated FTX customer funds.
A Bahamian prosecutor revealed their knowledge of the hedge fund’s existence during Bankman-Fried’s bail hearing in Nassau, Bahamas, before the former FTX CEO was extradited to the U.S. Bankman-Fried reportedly met Modulo’s founders Duncan Rheingans-Yoo and Xiaoyun Zhang during his stint at quant trading firm Jane Street Capital. He later allegedly invested about $300 million in the hedge fund before FTX filed for bankruptcy in November 2022.
According to the New York Times, lawyers handling FTX’s bankruptcy case have also listed the funds as a potential reclamation source for the exchange’s bankruptcy estate.
“Focusing on large, questionable transactions to a fund, company or a person with close connections to the debtor before the bankruptcy filing is basically the low-hanging fruit in a bankruptcy case,” noted University of Georgia bankruptcy professor Lindsey Simon.
Bankman-Fried was arrested in the Bahamas in December 2022 after the collapse of FTX, where he allegedly abused customer 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 has charged the MIT alum for abusing $1.8 million in investor funds.
Prosecutors Close in on Former CEO’s Assets Before Oct. 2023 Trial
Official prosecutors are closing in on Sam Bankman-Fried’s assets as they build up to his trial date in October 2023.
The prosecutors recently seized $50 million from Sam Bankman-Fried’s account at Washington state-based Farmington State Bank, where Alameda allegedly invested $11.5 million.
Farmington State Bank is located in Farmington, WA, a town of only 146 residents. Prosecutors are also examining three Binance accounts under Bankman-Fried’s name.
On Friday, Jan. 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 similar action around Bankman-Fried’s other investments, totaling roughly $4.6 billion. The former billionaire invested in Bored Ape Yacht Clubs creator Yuga Labs and an artificial intelligence company called Anthropic.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.