Bankrupt crypto exchange FTX and former CEO Sam Bankman-Fried allegedly used $200 million in customer deposits to make venture capital investments, according to a complaint.
The Securities and Exchange Commission (SEC) said in a Dec. 21 complaint against former FTX Chief Technology officer Gary Wang and Alameda Research CEO Caroline Ellison that “two $100 million investments made by FTX’s affiliated investment vehicle, FTX Ventures Ltd., were funded with FTX customer funds that had been diverted to Alameda.”
FTX diverted $200 million of customer money for two venture deals that caught the SEC’s attention https://t.co/na9f6EWAz1
— CNBC (@CNBC) December 28, 2022
FTX’s venture capital unit invested $100 million in financial tech company Dave, two months after its initial public offering (IPO), CNBC reported. FTX’s venture fund had $2 billion, according to a press release announcing the investment.
FTX also invested $100 million in Web3 company Mysten Labs as part of the company’s $300 million fundraising round. The investments were the only two $100 million or larger venture investments by FTX, according to Financial Times documents, the outlet reported.
Neither company has been linked to any alleged wrongdoing by FTX and Sam Bankman-Fried. The investments could be retrieved in bankruptcy court by trustees in an effort to retrieve customer assets, CNBC noted. (RELATED: REPORT: DOJ Investigating How Hacker Allegedly Stole Over $370 Million Hours After FTX Declared Bankruptcy)
Bankman-Fried was indicted on eight counts of fraud and conspiracy by federal prosecutors including wire fraud, money laundering and campaign finance violations. Ellison and Wang are both cooperating with prosecutors in the case, the outlet reported.
Bankman-Fried was also subject of a civil complaint by the SEC alleging he “was orchestrating a massive, years-long fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire.”
FTX and its U.S. operation were valued at $40 billion after a January 2022 fundraising round according to Forbes Magazine. The company filed for chapter 11 bankruptcy in November in the wake of reports alleging misused customer funds by FTX and Alameda.