Media startup Semafor said Wednesday it will return disgraced crypto mogul Sam Bankman-Fried’s seed investment following his indictment for fraud.
Semafor received roughly $10 million from Bankman-Fried, the company’s biggest outside investment, according to The New York Times (NYT). The outlet launched in October with $25 million in startup funding and centers its global coverage around its “Semaform” newsletter style, CNBC reported.
Scoop: Sam Bankman-Fried invested roughly $10 million of Semafor’s $25 million round, making him the company’s biggest outside investor. Semafor is buying back his interest and putting that money into a separate account while it raises new $$$https://t.co/3KQ5SwpDxQ
— Ben Mullin (@BenMullin) January 18, 2023
“We are planning to repurchase Sam Bankman-Fried’s interest in Semafor and to place the money into a separate account until the relevant legal authorities provide guidance as to where the money should be returned,” Semafor CEO Justin Smith told NYT. (RELATED: Alleged Fraudster Sam Bankman-Fried Says He Did Nothing Wrong In New Blog Post)
Smith previously told employees in a Dec. 2 memo the company would allow government agencies to provide guidance on how Semafor should handle his investment.
Smith co-founded Semafor with former NYT media reporter Ben Smith. The company has engaged in fundraising conversations but has not received additional investment, NYT reported.
Semafor agreed to deals with several advertisers worth over $2 million each before launch, providing the company with cash flow, despite setting aside Bankman-Fried’s funds, NYT added. Semafor has signed ad deals worth between $100,000 and $2 million since launch and the outlet expects to generate over $15 million in revenue from ads and events, NYT reported.
Bankman-Fried provided funds to other high-profile media companies such as Vox, The Intercept and ProPublica through grants from Building a Better Future, his family foundation. ProPublica and Vox said in December they would return Bankman-Fried’s grant money soon after his Dec. 13 arrest.
Bankman-Fried was indicted by federal prosecutors Dec. 13 on eight counts of fraud and conspiracy, including wire fraud, money laundering and campaign finance violations. He was released from custody Dec. 22 on a $250 million bond and confined to his parents house in Palo Alto, CA. Bankman-Fried pleaded not guilty to the charges and his trial is set for Oct. 2, 2023.
His net worth peaked at $26.5 billion and was estimated at $17.2 billion in September 2022, according to Forbes Magazine. Bankman-Fried’s fortune collapsed after allegations customer funds were misused by FTX, his crypto exchange, and its sister hedge fund. He told Axios Nov. 29 he had $100,000 left in his bank account the last time he checked.
Semafor did not immediately respond to a request for comment.