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US federal prosecutors believe Sam Bankman-Fried used money from the FTX exchange to invest in venture capital firm Modulo Capital, as reported by The New York Times reported. The American authorities may therefore have discovered another element of Sam Bankman-Fried's crypto-empire.
Christy Goldsmith Romero, a member of the US Commodity Futures Trading Commission, recently questioned the due diligence work done by the venture capital firms that funded Ftx: "Because they turned a blind eye to what should have been clear alarm?" The former's hedge fund and FTX subsidiary Alameda Research had invested a total of $400 million in Modulo Capital in 2022.
This was one of his most significant investments. The funding caught the attention of regulators, as Modulo was a relatively unknown company at the time; strange therefore that he received such an amount of capital, especially in a difficult moment for the crypto markets.
Here's how SBF would use FTX users' money
Investigators believe that the investment in Modulo was made using criminal proceeds, or money stolen from FTX customers who had deposited their funds on the exchange. Prosecutors said Modulo was a key part of the investigation, and the company's activities are now under scrutiny by FTX attorneys.
It is not yet clear what happened to the 400 million invested by Sam Bankman-Fried. 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 Alameda CEO Caroline Ellison.
One of Modulo's founders, Duncan Rheingans-Yoo, had only been out of college for two years; another founder, Xiaoyun Zhang (aka Lily) was a former Wall Street trader with some ties to Sam Bankman-Fried. It also appears that Modulo ran its business from the Bahamas, from the same condominium community where SBF resided.