The Bahamian Connection: How Modulo Capital Became a Key Piece in the FTX Puzzle | MONEY TALK

[AUDIO TRANSCRIPTION]

Hello and welcome to Bryf, your go-to source for breaking news, analysis and commentary from around the world. I'm Kyla and today we're going to be talking about the unknown hedge fund that received $400 million from Sam Bankman-Fried, the founder of FTX, a cryptocurrency exchange that collapsed in November.

As we reported earlier, before the collapse of FTX, Bankman-Fried sent $400 million to an obscure cryptocurrency trading firm called Modulo Capital. The firm, which was founded in March and operated out of the same Bahamian compound where Bankman-Fried lived, had no track record or public profile.

Now, Modulo is emerging as a crucial part of the investigation by federal prosecutors into Bankman-Fried and his once giant cryptocurrency exchange. They're examining whether he used FTX's customer funds to invest in the little-known firm when his existing hedge fund, Alameda Research, was struggling amid a wider crypto industry downturn. The $400 million outlay was one of Bankman-Fried's single largest investments.

At the same time, lawyers for FTX's new leadership are eyeing Modulo's assets as they scramble to recover the billions of dollars that customers, lenders and investors lost when the exchange imploded.

It's unclear how much of FTX's $400 million investment remains or where it is. But the authorities have been aware of the trading firm for months; the day after Bankman-Fried was arrested in the Bahamas in mid-December, he was denied bail at a court hearing where a local prosecutor argued that he was a flight risk and suggested he might be able to tap the funds sitting with Modulo.

Federal prosecutors in Manhattan investigating Bankman-Fried believe the Modulo investment was made using criminal proceeds — misappropriated money that FTX customers had deposited with the exchange, said a person briefed on the investigation.

The flow of money to Modulo has also caught the attention of the lawyers representing FTX in the company's bankruptcy proceeding in Delaware. In a slide presentation to the exchange's creditors that was filed in court last Tuesday, FTX's lawyers flagged the transaction with Modulo as one of its prime targets for reclaiming money.

As of now, neither of Modulo's two founders have been accused of wrongdoing, but they recently hired Aitan Goelman, a criminal defense lawyer who is a former director of enforcement for the Commodity Futures Trading Commission.

And that concludes today's episode of Bryf. The investigation into the collapse of FTX and the involvement of the hedge fund Modulo Capital is still ongoing, and we will continue to bring you the latest updates as they become available.

We appreciate your listening and as always, we strive to bring you unbiased, up-to-the-minute coverage of the stories that matter most. Thank you for tuning in, and we'll be back soon with more news, analysis and commentary from around the world. This is Kyla, signing off.

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