Sam Bankman-Fried invested $20mn in a big enterprise capital fund that then took a stake in his FTX cryptocurrency trade group, an association that highlights shut hyperlinks between the fallen billionaire and a few of his backers.
In late 2021 Bankman-Fried invested in a fund managed by Paradigm, an enormous backer of crypto start-ups. The identical $2.5bn “Paradigm One” fund later invested in his FTX and FTX US exchanges, based on disclosures made this week in chapter court docket.
Paradigm One was on the time the largest crypto-focused enterprise capital automobile. Because of the transactions, Bankman-Fried invested in and obtained financing from that single pot of cash.
“That’s simply bizarre,” stated Charles Whitehead, a professor at Cornell Legislation Faculty. He stated that although there was “nothing inherently improper” with such preparations, “it raises your eyebrows”.
Bankman-Fried has pleaded not responsible to US expenses of fraud and money-laundering after the collapse of FTX in November. He beforehand raised $1.8bn from exterior traders for his corporations.
Prosecutors and regulators allege that he defrauded these traders and funnelled cash from FTX clients to his Alameda Analysis hedge fund, which spent closely on dangerous investments in start-ups and crypto tokens.
Paradigm, launched in 2018 by former Sequoia Capital accomplice Matt Huang and Coinbase co-founder Fred Ehrsam, stated Bankman-Fried was handled the identical as its different traders in its fund.
San Francisco-based Paradigm additionally made a normal conflicts-of-interest disclosure to traders in Paradigm One which stated the fund might spend money on corporations run by its restricted companions, a spokesperson stated.
Bankman-Fried didn’t instantly reply to requests for remark.
Via Alameda, Bankman-Fried additionally invested $5mn in a fund launched by UVM, an arm of Singaporean financial institution United Abroad Financial institution, and Signum Capital. The fund invested in FTX, based on the brand new court docket data. Signum and UOB didn’t instantly reply to requests for remark.
UVM Signum and Paradigm are the primary identified examples of Bankman-Fried investing within the particular fund that backed his FTX companies.
Bankman-Fried invested tens of hundreds of thousands of {dollars} into a big selection of funds managed by enterprise capital companies that have been additionally backers of FTX, together with Sequoia Capital, the Monetary Occasions has reported. Alameda invested $200mn in Sequoia-managed funds, however in several automobiles than those who backed FTX, an individual near the agency beforehand stated.
Paradigm was a central investor in FTX. The agency helped FTX’s inside ventures crew run its July 2021 Sequence B funding spherical, based on a press launch for the fundraising. On the time, Huang stated Bankman-Fried was “a type of particular founders whose imaginative and prescient is each stunningly bold and uniquely tailored to the way forward for crypto”.
When Paradigm One launched just a few months later, in November 2021, Alameda was amongst its traders with a $20mn stake. Alameda later expanded its stake in Paradigm One by $5mn via an obvious buy from one other investor within the fund.
The Paradigm One fund then joined a January 2022 funding spherical for FTX and its US arm, which valued the 2 corporations at a mixed $40bn, based on a listing of FTX’s shareholders filed in US chapter court docket.
Paradigm wrote down its complete $278mn funding in FTX to zero in November, after the businesses filed for chapter within the US. Huang tweeted that month that he felt “deep remorse for having invested in a founder and firm who in the end didn’t align with crypto’s values”.
