SBF assets still being seized over gross mismanagement

The FTX collapse made the entire crypto industry tumble in November after filing for bankruptcy, and it cost Sam Bankman-Fried almost everything he had.

Since then, other exchanges associated with FTX and funds on the platforms have gone down, including Alameda Research and BlockFi. Its founder, Sam Bankman-Fried (SBF), was later arrested in the Bahamas.

The move was the first concrete action by regulators to hold him accountable for the billions that went down with the exchange. 

After his release on a $250 million bond, his assets were seized, and his property taken by the federal prosecutors. He has also lost several professional ties as no firms or individuals want to be associated with him and his ongoing saga. And yet, it is not over.

Feds seize almost $700 million of FTX assets

In the third week of January 2023, federal prosecutors seized almost $700 million in assets and cash connected to Sam Bankman-Fried, primarily Robinhood shares. These shares are at the center of a multi-party battle between BlockFi representatives, SBF himself, Caribbean litigants, and the FTX bankruptcy leadership. 

In May 2022, SBF announced that he had made a purchase, a 7.6% stake, in Robinhood, which he said was an attractive investment. According to the federal prosecutor, SBF purchased Robinhood shares with customer funds. However, he has denied any misappropriation of customer assets.

Notably, the seized accounts were in Silvergate Bank, under FTX Digital Markets, the Bahamian subsidiary of the exchange, with over $6 million. The government got hold of the assets around Jan. 11. Later, Silvergate disclosed that their customer deposits took a 70% plunge in the fourth quarter of 2022. 

Another $50 million of the funds were at Moonstone Bank since found to have ties with the FTX management. The remaining funds were in one Binance account and the other two Binance.US accounts.

However, the government has yet to disclose the amount contained in each. ED&F Man Capital Market, Inc also had $20.7 million seized during this period. 

Almost $50 million seized at Farmington Bank

Farmington, later rebranded to Moonstone, was just a tiny bank in rural Washington with three employees and offered agricultural-related loans to their customers. In a town with less than 146 residents, it was the 26th-smallest bank out of the 4800 banks in the United States. 

A 2010 report from a local paper mentioned that the bank was based in a building almost the size of a studio apartment and did not offer online banking or credit cards.

However, in March 2022, SBF took an $11.5 million stake through Alameda Research, his hedge fund, which was double the entire worth of the bank at the time. The management set up the bank as a significant operation for the marijuana industry and digital assets.

The bank had 32 employees and a $115 million valuation, similar to tech banks and trust-bank startups when the NYT made the report. Before, it barely reached $10 million in deposits in a decade. By late 2022, its deposits reached $84 million.

While it changed its name a few days before the Alameda investment, it did not mention cryptocurrencies directly. It only stated that it wanted to support the next generation of finance as it evolved.

Last week, it said it would return to its roots, changing its name and returning to a community bank. In a statement on Jan. 18, Farmington noted that the change in strategy reflects the crypto assets industry’s recent events.

It would have ended here. However, it gets weirder. Farmington State Bank was purchased in 2020 by Jean Chalopin’s banking company, a co-creator of Inspector Gadget, a 1980s cartoon. Before, he was the chairman of Deltec, a crypto firm in the Bahamas known for Tether stablecoin trades.

In 2021, he received a $50 million loan from FTX’s sister company.

Notably, at the start of 2022, Alameda made a 10% stake in the bank, around $11.5 million. This investment was headed by Ramnik Arora, part of SBF’s inner circle. Based on an article by The Information, Arora was fundamental to FTX’s design to create a monopoly in the crypto industry.

SBF is selling his house

Shortly after the Feds seized about $700 million from SBF, he put his townhome of four bedrooms and five bathrooms on the market for $3.28 million. Notably, its listing value is the same as that of the purchase.

According to available reports, SBF’s brother Gabe Bankman-Fried purchased the house in April 2022 via his nonprofit organization, Guarding Against Pandemics. 

The home is one of the properties he owns. A month after his extradition from the Bahamas to the U.S., he was released on a $250 million bail which he secured through the $4 million family home in Palo Alto, California. Notably, it is the same house where he is under house arrest.

Eyes on $400 million in Modulo Capital

On Jan. 26, authorities discovered another possible firm associated with SBF. U.S. Federal prosecutors alleged that he used FTX exchange’s money to invest in Modulo Capital, a venture capital firm. 

Earlier, Alameda Research invested $400 million in the firm in 2022, which was among the most significant investments by SBF. The firm first came under the regulator’s radar as it was a relatively unknown firm raising massive capital amounts while the industry was in challenging times. 

The latest findings by SBF investigators highlight that Modulo investment likely used FTX customer funds for the investment. FTX lawyers are now looking to access Modulo’s assets to pay creditors, investors, and customers associated with SBF.

Modulo Capital came about in March 2022, founded by former executives at Jane Street, an N.Y.-based firm whereby SBF and Caroline Ellison, the Alameda CEO, once worked. Xiaoyun Zhang, known as Lily, is also a firm co-founder and has ties to SBF.

What’s next for SBF?

So far, SBF has been charged with eight counts related to money laundering, wire fraud, and conspiracy to commit fraud. However, he has since pleaded not guilty to any of the charges.

On the other hand, SBF’s inner circle, Caroline Ellison and Gary Wang confessed and are working with investigators to uncover FTX dealings and their involvement in the exchange’s collapse.

If he is found guilty, SBF could be imprisoned. His fraud counts, among other crimes, carry a sentence of up to 115 years.