The Unknown Hedge Fund That Got $400 Million From Sam Bankman

The Unknown Hedge Fund That Got $400 Million From Sam Bankman

Sam Bankman-Fried, the company’s founder, moved $400 million to a mysterious cryptocurrency trading company named Modulo Capital not long before FTX failed in November.

The startup company, which was established in March and ran out of the exact Bahamian complex where Mr. Bankman-Fried resided, had no prior accomplishments or a well-known public persona.

Duncan Rheingans-Yoo, one of the founders, had just graduated from college two years before. Four persons with knowledge of their connection claim that his business partner, Xiaoyun Zhang, also known as Lily, was really a former Wall Street trader who had a love history with Mr. Bankman-Fried.

Currently, Modulo is showing up as a key component of the federal prosecutors’ investigation against Mr. Bankman-Fried and his once enormous cryptocurrency exchange.

They’re looking into whether he invested in the obscure company with money from FTX customers at a time when his other hedge fund, Alameda Research, was floundering due to a general decline in the cryptocurrency market. One of Mr. Bankman-single Fried’s greatest investments was the $400 million spend.

Investigators Were Suspicious Of Mr. Bankman-Fried:

Investigators were suspicious of Mr. Bankman-Fried since he gave a start-up trading company so much money while Alameda was losing money.

The local prosecutor used an affidavit created by another member of the Bahamian law enforcement during the bail hearing in Nassau that had been filed under secret in the Bahamas.

According to a source informed on the case, federal prosecutors in Manhattan looking into Mr. Bankman-Fried think the Modulo investment was done using illicit profits, looted money that FTX clients had placed with the exchange.

According to bankruptcy expert Lindsey Simon of the University of Georgia, “focusing on significant, dubious transactions to a fund, corporation, or a person with intimate links to the debtor before the bankruptcy filing is essentially the low-hanging fruit in a bankruptcy case.”

Bankman-Fried Was Detained In The Bahamas:

After FTX failed, Bankman-Fried was detained in the Bahamas in December 2022 on suspicion of misusing client money to support Alameda Research, an associate market maker. According to rumours, Bankman-investment Fried’s in Modulo was opposed by Caroline Ellison, the former CEO of Alameda Research.

FTX Officials Got Billions Of Dollars In Covert Loans:

The former head of the hedge fund revealed to the court that Sam Bankman-Fried as well as other FTX officials got billions of dollars in covert loans from the cryptocurrency mogul’s trading company Alameda Research when she pleaded guilty to her involvement in the collapse of the exchange.

According to a transcript of her Dec. 19 plea having heard that was publicly released on Friday, Caroline Ellison, the former CEO of Alameda Research, claimed she and Bankman-Fried agreed to conceal from FTX’s investors, lenders, and customers that the hedge fund can grab an unlimited amount from the exchange.

He Was Ordered By A Judge To Stay At Their California Parents’ Home Until His Trial:

He was mandated to remain at his California parents’ house until his trial by a magistrate court.As stated in a court order, Abrams withdrew herself from the action on Friday night. Her husband is a partner at the legal firm Davis Polk & Ward-well LLP, which advised FTX in 2021.

The judge stated that even though her partner had no involvement in such matters, that either “had been highly classified and their substance is unidentified to the Court,” she had been recusing herself in order to avoid a potential conflict. The firm also represented parties who might be adverse to FTX & Bankman-Fried in other proceedings.

Bankman-Fried Stopped Withdrawals:

When CoinDesk published a piece a week ago revealing that for at minimum $5.8 billion of the funds shown on the financial statements of Bankman-trading Fried’s company, Alameda Research, were really linked to FTT tokens created by his cryptocurrency exchange, FTX, everything started to fall apart. An important rival, Binance, reportedly said it will sell its stock of FTT in response to that revelation.

Customers had begun to withdraw their assets in large numbers by Tuesday, but Bankman-Fried stopped withdrawals from the exchange and said FTX had struck an agreement to be bought by Binance. But his bail was gone a day later. As justification, Binance cited “company due diligence, as well as the current press stories surrounding mismanaged client cash and purported US government probes” in a tweet announcing its withdrawal.

As reported by The Wall Street Journal, Bankman-Fried is now attempting to put together emergency capital to cover a deficit of up to $8 billion as a result of the client exodus.


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