FTX used $200 million of client funds for my legitimate investment

of billions of dollars in customer deposits disappear Of FTX immediately, $200 million was used to fund investments in two companies, according to the Securities and Exchange Commission, which Accused Founder Sam Bankman-Fried with “organizing scheme to defraud stock investors”.

By a unit of FTX Ventures, the cryptocurrency company in March invest $100 million in Dave, a financial technology company that went public two months ago through a special purpose acquisition company. At the time, the companies said they would “work together to expand the digital asset ecosystem.”

The other deal the SEC appears to have been referring to was a $100 million investment round in it September for Miston Laboratories, a Web3 company. In total, it was $300 million funding round which valued Mysten at $2 billion and included participation from Coinbase Ventures, Binance Labs, and Andreessen Horowitz’s Crypto Fund.

While FTX Ventures has made dozens of transactions, according to PitchBook, Mysten Labs and Dave investments were the only two disclosed investments worth more than $100 million, based on documents it published. Financial Times, which broke down how the company invested $5.2 billion in the business. FTX Ventures is described in its press release with Dave as a $2 billion investment fund.

Bankman Fried, 30, has been charged with a crime committing a massive fraud After FTX, which private investors estimated was worth $32 billion earlier this year, entered the bankruptcy In November. The main theme in the accusations is how Bankman-Fried transferred money from FTX to his hedge fund, Alameda Research, which then used that money for risky deals and loans. FTX Ventures is allegedly part of this scheme.

Neither Mysten nor Dave have been linked to any alleged wrongdoing within the Bankman-Fried empire. But investments sound The first specific examples of client funds being used by FTX and Bankman-Fried for project financing. As investigators and FTX lawyers try to track the outflow of FTX funds, these specific investments and others in the $5 billion portfolio of projects will attract intense scrutiny.

By explicitly linking the two $100 million investments to clients’ money, the SEC raised the possibility that they could be refund possibilities. If FTX bankruptcy trustees can prove that client funds funded Bankman-Fried investments, they can proceed to recover those funds as part of an effort to recover clients’ assets.

A spokesman for the Securities and Exchange Commission declined to comment.

Dave CEO Jason Wilk told CNBC that FTX’s investment in Dave is already scheduled to be paid back, with interest, by 2026. FTX’s $100 million investment was through a convertible note, which is a short-term cash loan that FTX can convert to shares later. Date. That transfer never took place, leaving Dave with a liability of $101.6 million, including interest, to FTX and any successor companies, according to The company’s most recent SEC filings.

“The note issued to FTX is due for payment in March 2026,” the company said in a statement. “No conditions in the note give rise to any present obligation by Dave to pay before the due date.”

“It is important to state that we have no knowledge of FTX or Alameda using client assets to make investments,” Welk added.

Bankman-Fried’s investment in Mysten Labs was a stock transaction. Because Mysten is a private company, there is no clearly defined process in US bankruptcy code for recovering that money.

Myston declined to comment. Attorneys for Sullivan & Cromwell, which represents FTX, did not respond to requests for comment.

that SEC complaint Two Bankman-Fried associates, Carolyn Ellison and Gary Wang, were sued that “two $100 million investments made by FTX’s investment firm, FTX Ventures Ltd, were funded with FTX client funds diverted to Alameda.”

No matter what money is being used, FTX’s investments were badly timed.

Dave’s shares are down more than 97% since the company’s IPO, reflecting the performance of a broader basket of SPACs. In July, Nasdaq Dave warned that if its share price does not improve, it could run the risk of being written off. The stock is currently trading for 28 cents and the market capitalization is around $100 million.

Alameda Research previously invested $15 million in Dave in August 2021, prior to the Nasdaq listing. Dave was established in 2016 and provides customers with a Free cash advance on their future income as part of a suite of banking products. Mark Cuban led a $3 million seed round in 2017.

The investment would have been profitable for FTX if Dave’s share price had improved beyond $10 a share, allowing FTX to convert at a profit.

FTX’s investment in Mysten came in the midst of the cryptocurrency crash. bitcoin And the ether It has fallen by more than half during the year and many hedge funds and lenders have gone bankrupt.

Mysten CEO Ivan Cheng said at the time that the money was to be used for Mysten’s efforts to “build a blockchain that matches demand and spurs growth.”

Representatives for Ellison and Wang did not respond to requests for comment. A representative for Bankman-Fried declined to comment.

Ellison, 28, and Wang, 29, He pleaded guilty in New York last week to federal charges on illegal use of client funds for trade and investment purposes, It was allegedly directed by Bankman Fried. They both cooperate with Federal Investigations at Bankman-Fried And the FTX breakdown.

Watch: Terms of FTX founder Sam Bankman-Fried’s $250 million surety agreement