Sam Bankman-Fried invested $20 million in a large venture capital fund and then invested in his cryptocurrency exchange FTX Group.
In late 2021, Bankman-Fried invested in a fund managed by Paradigm, a big backer of cryptocurrency startups. The same $2.5 billion “Paradigm One” fund later invested in his FTX and FTX US exchanges, according to disclosures made this week in bankruptcy court.
Paradigm One was the largest crypto-focused venture capital vehicle at the time. As a result of the transaction, Bankman-Fried invested in his one pot and received a loan from it.
Charles Whitehead, a professor at Cornell University Law School, said, “It’s just weird. He said there’s “nothing inherently wrong” with such an arrangement, but that it’s “raised eyebrows.”
Bankman-Fried pleaded not guilty to US fraud and money laundering charges after FTX collapsed in November. He previously raised his $1.8 billion from outside investors for his company.
Prosecutors and regulators allege he tricked those investors into pouring money from FTX clients into his Alameda Research hedge fund.
Launched in 2018 by former Sequoia Capital partner Matt Huang and Coinbase co-founder Fred Ehtham, Paradigm sees Bankman-Fried like other investors in its fund. said to have been dealt with.
San Francisco-based Paradigm has also made general conflict of interest disclosures to investors in Paradigm One, and the fund may invest in companies operated by limited partners, a spokesperson said. Stated.
Bankman-Fried did not immediately respond to a request for comment.
Through Alameda, Bankman-Fried also invested $5 million in funds launched by UVM and Signum Capital, a division of Singaporean bank United Overseas Bank. The fund invested in FTX, according to new court records. Signum and UOB did not immediately respond to requests for comment.
UVM Signum and Paradigm are the first known examples of Bankman-Fried investing in specific funds backing his FTX business.
Bankman-Fried has invested tens of millions of dollars in various funds managed by venture capital firms that are also backers of FTX, including Sequoia Capital, the Financial Times reports. Alameda said he invested $200 million in a fund managed by Sequoia, but in a different way than backing FTX, a person close to the company previously said.
Paradigm was a core investor in FTX. The company helped FTX’s internal venture team to execute its Series B funding round in July 2021, according to the funding press release. Huang said at the time that Bankman-Fried was “one of his exceptional founders with a vision that is amazingly ambitious and uniquely adapted to the future of cryptocurrencies.”
A few months later, when Paradigm One launched in November 2021, Alameda was one of the investors with a $20 million stake. Alameda later expanded Paradigm’s stake in One by $5 million, apparently through a purchase from another investor in the fund.
The Paradigm One fund subsequently participated in a January 2022 funding round for FTX and its U.S. division, according to FTX’s shareholder list filed with the U.S. Bankruptcy Court.
Paradigm cut its total $278 million investment in FTX to zero in November. This was after the company filed for bankruptcy in the United States. Huang tweeted earlier that month that he “deeply regrets investing in a founder and company that ultimately does not align with crypto values.”