FTX Bankruptcy Team Recovers $404M from Bahamas Hedge Fund

Updated: 24 March 2023

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The ongoing FTX bankruptcy case has revealed several significant issues that may have played a role in the exchange’s downfall. One critical factor was the mismanagement of customer funds by founder and CEO Sam Bankman-Fried.

As the investigation continues, administrators are uncovering additional factors that contributed to the exchange’s collapse, highlighting the importance of proper management and oversight in the cryptocurrency industry.

FTX’s restructuring team has successfully resolved a dispute with Modulo, a hedge fund based in the Bahamas, resulting in more than $400 million recovery. The team, led by John J. Ray III, recovered $404 million from Modulo, as reported by Reuters.

Notably, FTX’s founder, Sam Bankman-Fried, had acquired a $25 million stake in Modulo and transferred $450 million to the fund in 2022 before being implicated in the scandal.

Modulo To Give up The $56 Million Claim

Under the settlement terms, Modulo has agreed to return the $404 million and forfeit its rights to $56 million held at FTX exchange. In exchange for these concessions, the bankruptcy team has agreed not to pursue further action against Modulo’s management. This resolution will allow FTX to recover 97% of the funds transferred to Modulo.

FTX Team On Recovering Spree

In December 2022, FTX’s liquidators reported recovering over $1 billion in customers’ assets, a figure that increased to $5 billion in January following FTX’s lawyers’ revelations. In March, it was reported that FTX affiliate Alameda Research had sued Grayscale, a crypto asset manager, to recover at least $250 million.

As founder Sam Bankman-Fried had been known to donate customers’ funds to charities and political causes, the restructuring team has requested that donation recipients return the funds or face legal action.

However, the liquidators have also faced challenges in recovering assets. The liquidation team lost $72,000 while closing a position on the decentralized finance platform Aave. FTX’s lawyers and accountants also charged $40 million for a month’s work, while John Ray III charged $300,000 for February alone.

Recent Update on FTX

According to recent findings by the US Feds FTX Task Force, founder and CEO Sam Bankman-Fried and several high-ranking executives at Alameda Research obtained loans and payments totaling $3.2 billion from both platforms.

The FTX Debtors disclosed this discovery in their latest financial statement filing, which is in addition to other funds used for personal expenses. This latest revelation adds to the growing list of issues uncovered during the FTX bankruptcy case and underscores the importance of transparency and accountability in the cryptocurrency industry.

Following the collapse of FTX, the task force, led by CEO John Ray III, has been meticulously tracing the exchange’s funds to uncover misappropriated sums. Shockingly, one record revealed that over $8 billion is missing from the exchange, indicating a severe breach of trust.

In recent financial statements filed in the Delaware Bankruptcy Court, FTX debtors have disclosed that founder and CEO Sam Bankman-Fried and top executives of Alameda Research received billions of dollars in loans and payments. Furthermore, additional funds were obtained from the Alameda Research trading house.

The implicated executives include FTX co-founder Gary Wang, former director Nishad Singh, former CEO of Alameda Research Caroline Ellison, former co-CEO of FTX Digital Markets Ryan Salame, and former co-CEO of Alameda Research John Samuel Trabucco. These shocking revelations underscore the critical need for transparency and accountability in the cryptocurrency industry, and the ongoing investigation will undoubtedly have far-reaching consequences.

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