FTX Used $200M in Customer Deposits to Fund Venture Deals – zoohousenews.com

FTX Used $200M in Customer Deposits to Fund Venture Deals – zoohousenews.com

FTX Used 0M in Customer Deposits to Fund Venture Deals – zoohousenews.com

(Natural News) FTX diverted $200 million worth of customer deposits to fund two venture deals, which caught the attention of the Securities and Exchange Commission.

In March, the cryptocurrency firm reportedly invested $100 million through its unit FTX Ventures in fintech firm Dave, which had gone public just months earlier. At the time, the companies announced that they were working on expanding the “ecosystem for digital assets”.

In another deal that caught the SEC’s attention, FTX invested $100 million in Web3 company Mysten Labs in September. This ended with a $300 million funding round for the company, which Mysten Labs saw as valued at $2 billion and also joined by Binance Labs and Coinbase.

The Financial Times reports that although FTX Ventures has been involved in dozens of different transactions, its investments in Dave and Mysten Labs are the only disclosed $100 million investments.

Former FTX CEO Sam Bankman-Fried has been accused of widespread fraud after the company filed for bankruptcy from a $32 billion valuation earlier in the year. Central to many allegations is the fact that the 30-year-old diverted FTX funds to his hedge fund Alameda Research, which then used the money to conduct risky trades and make questionable loans.

While Dave and Mysten Labs have not been linked to Bankman-Fried’s wrongdoing, the investments serve as evidence that FTX and Bankman-Fried are using client funds for venture funding. It is likely that this and other investments from FTX’s $5 billion venture pool will come under scrutiny as investigations into the use of FTX funds continue.

Brighteon.TV

The SEC set the stage for recoveries by tying these two big investments to customer funds. Should FTX’s liquidators prove that client funds were used to fund Bankman-Fried’s investments, they could attempt to reclaim those funds to recover client assets.

While Mysten Labs officials declined to comment on the situation, Dave CEO Jason Wilk told CNBC that the company already had plans to pay back FTX’s investment in Dave with interest by 2026. This is a short-term cash loan that could convert FTX into shares in the future. However, they never made the conversion, leaving Dave with a $101.6 million liability to FTX and its successor companies.

Dave noted in a statement that there are no terms in the note obliging Dave to repay the investment before the due date. However, Wilk emphasized that the company was not aware that FTX and Alameda used client funds for their investments.

The investment Bankman-Fried made in privately held Mysten Labs is said to be an equity deal.

Questionable investments

Those investments haven’t fared very well, with Dave’s shares down more than 97 percent since going public. They were warned by Nasdaq this summer that they would be delisted if their share price didn’t improve; It currently trades for 28 cents and has a market cap of around $100 million.

Meanwhile, their ill-timed Mysten Labs investment came amid the crypto meltdown, at a time when ether and bitcoin have fallen by more than half for the year and countless lenders and hedge funds have filed for bankruptcy.

Last week, Bankman-Fried’s lieutenants Caroline Ellison and Gary Wang pleaded guilty to their illegal use of client funds for venture investing and trading. Both are reportedly cooperating with the federal investigation into the FTX collapse and Bankman-Fried’s actions. Ellison, who was CEO of Alameda and once dated Bankman-Fried, apologized for defrauding investors. Both individuals said they knew what they were doing was wrong, which could shatter Bankman-Fried’s defense that his wrongdoings were unintentional mistakes.

Sources for this article are:

CNBC.com

MSNBC.com

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