FTX Crypto Exchange Reaches Deal to Recover Over $400 Million from Hedge Fund Modulo Capital

Bankrupt crypto exchange FTX has reached a deal to recover more than $400 million (roughly Rs. 3,300 crore) in cash from hedge fund Modulo Capital, pulling back 97 percent of the money that FTX companies sent to the hedge fund in 2022, according to court documents filed on Wednesday.

Bahamas-based Modulo agreed to pay $404 million (roughly Rs. 3,300 crore) in cash and give up its claim to $56 million (roughly Rs. 460 crore) in assets held on FTX's crypto exchange, according to a filing in US bankruptcy court in Delaware.

FTX filed for bankruptcy protection in November, saying it was unable to completely repay customers who had deposited funds on its exchange. FTX's new CEO, John Ray, has said his top priority was recovering assets to repay FTX customers.

FTX's affiliated hedge fund Alameda Research sent $475 million (roughly Rs. 3,900 crore) to Modulo in a series of transfers beginning in May 2022, a time when FTX was losing money and heading toward bankruptcy, according to the court filings.

Alameda, at the direction of FTX founder Sam Bankman-Fried, had paid $25 million (roughly Rs. 200 crore) to acquire a stake in Modulo and contributed $450 million (roughly Rs. 3,700 crore) to an investment fund managed by Modulo, according to the filings.

The settlement recovers most of those payments and takes 99 percent of Modulo's remaining assets, according to the filings.

FTX and Alameda will give up their claim to any ownership of Modulo as part of the settlement. FTX also agreed to not take further actions against Modulo or its principals Xiaoyun Zhang and Duncan Rheingans-Yoo related to the 2022 payments, according to the filings.

FTX, Bankman-Fried, and Modulo Capital did not immediately respond to requests for comment.

FTX has previously recovered more than $5 billion (roughly Rs. 41,100 crore) in its quest to repay customers of the bankrupt crypto exchange. FTX said last week that it was investigating more than $3.2 billion (roughly Rs. 26,300 crore) that was transferred out of the company through payments and loans to company founders and key employees.

Bankman-Fried has been charged with stealing billions of dollars in FTX customer funds to cover losses at Alameda Research, and making tens of millions of dollars in illegal political donations to buy influence in Washington, DC.

He denies wrongdoing and is fighting to stay out of jail pending his scheduled October 2 fraud trial.

© Thomson Reuters 2023