FTX  Recovers $404M from Bahamas Hedge Fund Modulo

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Key Takeaways:

  • The Bahamas-based Modulo will forfeit its right to $56 million in assets stored on FTX’s cryptocurrency exchange and return $404 million in cash. 
  • As part of the agreement, FTX and Alameda will also renounce their shareholding interests in Modulo.

In a significant win in the active bankruptcy proceedings, FTX Estate filed a petition to enter into an arrangement that would reclaim $460 million in assets for stakeholders. 

The assets are recuperation from Modulo Capital, a Bahamas-based investment company and hedge fund founded by Xiaoyun “Lily” Zhang and Ducan Rhenigans-Yoo in 2022, with $475 million in seed money from Alameda Research. Sam Bankman-Fried, the previous CEO of FTX, was a close friend of Zhang and Rhenigans-Yoo.

There are speculations that  Sam Bankman-Fried knew the executives in issue, Xioayun “Lily” Zhang and Duncan Rheingans-Yoo, from his time working for Jane Street before they left to start their own investment company. 

Sam Bankman-Fried, the founder of FTX, had, in fact, invested $25 million in Modulo and transferred $450 million to the fund in 2022 before becoming involved in the controversy.

According to court documents, Modulo has promised to return the $404 million in cash that FTX and Alameda used to stake its hedge fund operations and to release its own claim to the $56 million in assets that are still ensconced on the defunct FTX’s cryptocurrency exchange.

A suggested agreement to sell FTX’s stake in Mysten Labs back to the startup’s founders, former Meta executives, is responsible for about 5% of that total, or $95 million, as it was revealed on Thursday.

The bankruptcy committee has promised to refrain from taking additional legal action against Modulo’s management in return for these concessions. With the help of this decision, FTX will be able to recoup 97% of the money sent to Modulo.

According to the documents, FTX also consented to refrain from taking any further legal action against Modulo or its founders, Xiaoyun Zhang, and Duncan Rheingans-Yoo, in connection with the 2022 payments.

The Modulo leadership is said to have approved the clawback conditions, saving both parties the court costs. The FTX Group has already attempted to take comparable action against Voyager and has declared its intention to go after contributions made to political candidates, so potential clawback attempts will probably follow.

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Aadrika Sharma
Aadrika Sharma

I enjoy writing and try to learn new things every passing day!

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