FTX Moves to Recoup $460 Million from Modulo Capital

Modulo’s $460 million marks a significant recovery in the ongoing bankruptcy case.

Bankrupt crypto exchange FTX is currently working toward recovering some of the customer funds that were reportedly misappropriated. To this end, it filed a motion on Wednesday that would see it recover $460 million in assets for stakeholders. Per the filing, the fund is being recovered from Bahamas-based hedge fund Modulo Capital, which received no less than $475 million from Alameda Research – the investment arm of FTX, throughout 2022.

According to earlier reports, the Modulo Capital investment was one of the biggest investments of FTX under the leadership of former CEO Sam Bankman-Fried (SBF). And as the new filing suggests, SBF may have directly instructed Alameda Research to carry out various investments in Modulo, in a series of transfers that began in May 2022. A partnership agreement was reached between Modulo and Alameda on June 16. And it was the agreement that saw Alameda transferring funds to Modulo while it gets 20% ownership of Modulo’s Class A shares in return.

For many, there was more to the funding of Modulo than meets the eye. Modulo Capital was founded in March 2022 and was run by three former executives at Jane Street, a New York-based firm where SBF was once an employee.

There were also reports that Bankman-Fried was romantically involved with Xiaoyun “Lily” Zhang, a co-founder at the obscure VC firm. Maybe that could explain the motivation and constant push to invest in Modulo.

Modulo Capital Agrees Terms, Promises to Pay $460 Million

Going by the settlement agreement, however, Modulo has now agreed to repay $460 million to FTX. But, that represents only 97% of the entire amount of investment it got from the bankrupt exchange. Modulo says it will pay $404 million in cash and also give up its claim of $56 million worth of assets on FTX’s crypto exchange. Whereas, the settlement also impacts Alameda in such a way that it loses all its claims to Modulo shares.

FTX Still a Long Way from Shortfall

Last week, FTX issued a presentation to creditors where it noted that claims against it are in the excess of $11 billion. The bankrupt exchange also revealed that it has only $4.7 billion in assets, meaning that there’s a total shortfall of about $7 billion.

So, while Modulo’s $460 million marks a significant recovery in the ongoing bankruptcy case, the amount is only a little fraction (less than 7%) of the current shortfall. Nonetheless, the settlement means the firms can avoid a costly legal battle.

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Mayowa is a crypto enthusiast/writer whose conversational character is quite evident in his style of writing. He strongly believes in the potential of digital assets and takes every opportunity to reiterate this.
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