Sam Bankman-Fried’s FTX empire ties with VC firms under probe
SBF News: Sam Bankman Fried, co-founder and former CEO at FTX, invested more than 20 million USD in a venture capital company, Paradigm. Paradigm later purchased a stake in FTX. Court filings revealed this.
The court proceedings of once-a crypto billionaire are underway and there is a lot of information that is being made public. This week’s bankruptcy filing revealed that Bankman-Fried had invested 2.5 billion USD in a Paradigm fund. The fund was later invested by Paradigm One on FTX and other US exchanges.
Paradigm stated that Bankman-Fried was treated the same as other investors in the fund. It was founded by Matt Huang, a former Sequoia Capital partner, and Fred Ehrsam, Coinbase co-founder.
A Paradigm One spokesperson stated that Paradigm One in San Francisco also disclosed broad conflicts to investors. This included the possibility that the fund might invest in businesses managed or controlled by its limited partners.
Paradigm and the FTX Connection
Paradigm was a major investor and helped the FTX team to run its Series B fundraising in July 2021. Alameda Research owned a 20 million dollar stake in Paradigm One, which was launched in November. Later, they increased it by 5,000,000 USD by buying from another investor. It joined the funding of FTX on February 20, 2022. The company and its U.S. wing were valued at 40 billion USD.
Also see: Coinbase to Close Japan Operations Following Crypto Winter?
After FTX filed bankruptcy on November 11, 2022 the firm reduced its investment of 278 millions USD in FTX down to zero. Later, Huang, the co-founder of FTX, expressed regret at having invested in Bankman-Fried’s empire.
The Investment Fiasco of Bankman-Fried
Sam Bankman-Fried invested millions in venture capital firms, including Sequoia Capital and UVM Signum. They were major backers for FTX. According to Financial Times, Alameda Research, a sister company of FTX, invested more than 200 million USD in Sequoia funds.
He is accused of defrauding these investors and using FTX client funds to support his Alameda Research hedgefund, which primarily invested with crypto tokens and hazardous start-ups. To get investors to fall for the scheme, he made false financial claims.
Also read: Voyager Binance Deal: Customers to Recover 51% of Pre-Bankruptcy Blockchain Assets
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