Key Takeaways
- • Sam Bankman-Fried transferred $400 million to Modulo Capital, an obscure cryptocurrency trading firm founded in March 2022, shortly before FTX's November collapse—representing one of his single largest investments.
- • Modulo Capital was operated out of the same Bahamian compound where Bankman-Fried resided and was co-founded by Duncan Rheingans-Yoo (two years post-college) and Xiaoyun Zhang, a former Wall Street trader with a prior romantic relationship to Bankman-Fried.
- • Federal prosecutors are investigating whether Bankman-Fried diverted FTX customer funds to Modulo Capital while Alameda Research, his existing hedge fund, was deteriorating amid broader crypto market decline.
- • Approximately $400 million of the investment has been recovered and held in an interest-bearing account at JPMorgan Chase, according to sources with knowledge of the matter.
- • FTX's post-bankruptcy legal team is pursuing recovery of Modulo Capital's remaining assets as part of broader efforts to recoup billions in losses for customers, lenders, and investors.
Summary
In the months preceding FTX's catastrophic collapse in November 2022, Sam Bankman-Fried channeled $400 million into Modulo Capital, a virtually unknown cryptocurrency trading hedge fund that would later become central to federal investigations into the cryptocurrency exchange's misuse of customer funds. The transaction represented one of Bankman-Fried's largest single investments and occurred during a period when his primary fund, Alameda Research, faced mounting financial pressure from the crypto industry's broader downturn.
Modulo Capital's profile underscores the opacity of the arrangement. Founded in March 2022, the fledgling firm operated from the Bahamian compound where Bankman-Fried maintained residence. Its founding team consisted of Duncan Rheingans-Yoo, a recent college graduate, and Xiaoyun Zhang (known as Lily), a former Wall Street trader. According to four individuals with knowledge of their relationship, Zhang had previously been romantically involved with Bankman-Fried, raising questions about the investment's legitimacy and governance.
Federal prosecutors examining Bankman-Fried's conduct are now scrutinizing whether customer funds from FTX were diverted to Modulo Capital as a mechanism to prop up Alameda Research during the latter's financial deterioration. This line of inquiry forms part of the broader investigation into alleged misappropriation of FTX customer deposits. The $400 million allocation exemplifies the scale of potential fund diversion prosecutors are examining.
On the asset recovery front, FTX's restructured leadership has begun pursuing Modulo Capital's holdings. According to sources familiar with the matter, approximately $400 million sits in an interest-bearing account at JPMorgan Chase, the world's largest bank. This recovery effort is critical to addressing the billions in losses sustained by FTX's customers, lenders, and investors following the exchange's implosion. The precise location and current status of the remaining funds remain unclear, though authorities have monitored Modulo Capital for months.
Modulo Capital's profile underscores the opacity of the arrangement. Founded in March 2022, the fledgling firm operated from the Bahamian compound where Bankman-Fried maintained residence. Its founding team consisted of Duncan Rheingans-Yoo, a recent college graduate, and Xiaoyun Zhang (known as Lily), a former Wall Street trader. According to four individuals with knowledge of their relationship, Zhang had previously been romantically involved with Bankman-Fried, raising questions about the investment's legitimacy and governance.
Federal prosecutors examining Bankman-Fried's conduct are now scrutinizing whether customer funds from FTX were diverted to Modulo Capital as a mechanism to prop up Alameda Research during the latter's financial deterioration. This line of inquiry forms part of the broader investigation into alleged misappropriation of FTX customer deposits. The $400 million allocation exemplifies the scale of potential fund diversion prosecutors are examining.
On the asset recovery front, FTX's restructured leadership has begun pursuing Modulo Capital's holdings. According to sources familiar with the matter, approximately $400 million sits in an interest-bearing account at JPMorgan Chase, the world's largest bank. This recovery effort is critical to addressing the billions in losses sustained by FTX's customers, lenders, and investors following the exchange's implosion. The precise location and current status of the remaining funds remain unclear, though authorities have monitored Modulo Capital for months.
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