FTX’s Bankman-Fried Gave Ex-Jane Street Traders Who Formed Modulo Capital $400M

Founded in early 2022, Modulo operated out of the same luxury Bahamian condominium community where Sam Bankman-Fried and other FTX employees lived.

AccessTimeIconDec 19, 2022 at 9:05 p.m. UTC
Updated Oct 18, 2023 at 10:35 p.m. UTC

When a spreadsheet listing Sam Bankman-Fried’s venture investments was published by the Financial Times earlier this month, a couple of lines stood out. They showed the former cryptocurrency kingmaker’s hedge fund, Alameda Research, had invested a total of $400 million into a company called Modulo Capital.

Though this amounted to one of Bankman-Fried’s largest venture capital bets, Modulo’s identity was a mystery, giving rise to plenty of speculation. Was it a Brazilian fund manager with a nearly identical name (besides an accent mark over the first letter O)?

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  • No. It’s a multi-strategy hedge fund founded early this year by two former Jane Street traders and one developer, a person familiar with the matter told CoinDesk.

    Modulo Capital did not respond to a request for comment, nor did Bankman-Fried or former Alameda CEO Caroline Ellison.

    Modulo does, however, have more in common with Bankman-Fried than some of Alameda's other venture investments.

    Jane Street is a New York-based proprietary trading firm where Bankman-Fried and Ellison worked prior to making it big in the crypto industry. Bankman-Fried was known to hire former Jane Street employees as executives or employees, including former FTX US President Brett Harrison.

    Also, public filings show Modulo was based in the Bahamas and operated from Albany, the same luxury condominium complex where Bankman-Fried and other FTX and Alameda employees resided.

    Modulo traded crypto as well as traditional financial assets, two people familiar with the matter said. Modulo approached several traditional financial institutions for funding before taking on Alameda as its sole investor, one of the people added. A person familiar with the matter confirmed that Alameda did indeed invest $400 million into Modulo.

    “It didn’t strike me as that crazy. Sam liked to throw money at things that were positive [expected value] and ex-Jane Street people seem relatively positive EV,” the person told CoinDesk. “It was better than some of the trash Alameda was throwing money at.”

    Alameda’s investments are under heavy scrutiny as creditors await repayment from a grueling bankruptcy process involving the company and its sibling, FTX, a crypto exchange. In testimony before the U.S. House Financial Services Committee last week, new FTX CEO John J. Ray III said the deficit was estimated at $8 billion and “a complete lack of recordkeeping” has made it challenging to trace the money trail.

    The list of investments on the spreadsheet also led to shocking revelations about how far Bankman-Fried’s ties stretched, including speculation over whether or not he improperly used his money to buy influence or enrich associates. In addition to the $400 million Modulo investment, Alameda also loaned $43 million to the CEO of crypto news outlet The Block, invested $25 million in Toy Ventures – a venture fund founded by FTX head of product Ramnik Arora – and acquired a $270 million stake in the U.S. Securities and Exchange Commission-licensed stock exchange IEX.

    CORRECTION (Dec. 19, 2022, 21:19 UTC): The Modulo Capital trio included two former Jane Street traders and one developer, not three traders.

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    Tracy Wang

    Tracy was the deputy managing editor at CoinDesk. She owns BTC, ETH, MINA, ENS and some NFTs.