Media reports indicate that Sam Bankman-Fried (SBF) sent $400 million to Modulo Capital, a little-known crypto hedge fund run by a former Jane Street trader with close ties to the disgraced former FTX CEO.
According to the New York Times (NYT), Modulo was established in March 2022 before being the beneficiary of one of SBF’s most significant investments during his time at the helm of FTX.
The company reportedly had offices in the same compound as SBF’s residence in Nassau, Bahamas, and had no public profile or trading history.
Modulo’s co-founder may have dated SBF
The NYT claims Duncan Rheingans-Yoo, one of Modulo’s founders, had just graduated from college two years before starting the company. Furthermore, the publication said Rheingans-Yoo’s business partner, Xiaoyun Zhang, also known as Lily, had a romantic past with SBF.
The report cited four unnamed people with alleged knowledge of the relationship who claimed Ms. Zhang worked at SBF’s former Wall Street firm, Jane Street, around the time Bankman-Fried had been there.
A spreadsheet published by the Financial Times in December 2022 and reported on by crypto.news showed that Bankman-Fried’s other company, Alameda Research, made two significant investments in Modulo Capital of $250 million and $150 million in the third and fourth quarters of 2022.
It’s unknown how much money Modulo had in addition to the investment made by SBF. However, it started trading cryptocurrencies just before FTX went under in November 2022. According to the NYT report, the company is currently not operating.
Investment sparked concern
SBF’s decision to put such massive amounts into an unknown trading start-up when his companies were losing so much money has reportedly piqued the curiosity of law enforcement officials.
At Bankman-Fried’s bail hearing in the Bahamas, a day after he was arrested, prosecutors reportedly cited a sealed affidavit from a member of Bahamian law enforcement that indicated federal prosecutors in Manhattan were looking into SBF’s Modulo investment to determine whether it was made using illicit proceeds.
Additionally, legal representatives for FTX’s new leadership are also looking into Modulo’s assets, intending to recoup the billions of dollars lost when the crypto exchange collapsed.
According to reports, FTX’s attorneys made a slide presentation on January 17 to the company’s creditors that flagged the Modulo transaction as a prime candidate for recouping funds. However, nobody knows how much of the $400 million investment remains.
Even though neither Duncan Rheingans-Yoo nor Xiaoyun Zhang has been charged with a crime, they have recruited Aitan Goelman, a criminal defense attorney and former director of enforcement for the Commodity Futures Trading Commission (CFTC).