FTX Seeks to Reclaim $400M From a JPMorgan Account: New York Times

The funds, invested in a hedge fund called Modulo, were converted into cash and are sitting in an interest-bearing account.

AccessTimeIconFeb 15, 2023 at 1:05 p.m. UTC
Updated May 9, 2023 at 4:08 a.m. UTC

FTX's new leadership is negotiating the return of $400 million the crypto exchange's founder, Sam Bankman-Fried, invested in little-known hedge fund Modula Capital, according to a New York Times report that cites four people with knowledge of the matter.

Modulo is a multistrategy hedge fund founded in 2022 by two former Jane Street traders and one developer, a person familiar with the matter told CoinDesk in December. Jane Street is a New York-based proprietary trading firm where Bankman-Fried worked prior to making it big in the crypto industry. Public filings show Modulo was based in the Bahamas and operated from Albany, the same luxury condominium complex where Bankman-Fried and other employees of FTX and its sister company Alameda resided.

Around the time FTX collapsed, Modulo’s holdings were converted into cash and are stored in an interest-bearing account with JPMorgan, which served as its prime broker, handling its trading in stocks and stock futures, the NYT report said. The fund is looking for FTX to release it from certain legal liabilities in exchange for returning the money, the New York Times said, citing one of the four people. There is no indication that the Modulo founders did anything wrong, according to the report.

Modulo's two founders, Duncan Rheingans-Yoo and Xiaoyun Zhang, known as Lily, recently hired Aitan Goelman, a criminal defense lawyer who is a former director of enforcement for the Commodity Futures Trading Commission, a previous New York Times report said. Goelman didn't immediately respond to a CoinDesk request for comment.

Court filings have revealedthe U.S. government wants to take control of nearly $700 million of assets it seized in January from Bankman-Fried, according to court filings. But it is not clear why prosecutors have not seized the Modulo funds at JPMorgan, the report said.

The U.S. Attorney’s Office for the Southern District of New York declined to comment. JPMorgan and representatives for FTX didn't respond to requests for comment. They all declined to respond to NYT requests for comment, the report said.

UPDATE (Feb. 15, 15:43 UTC): Adds response from U.S. attorney’s office for the Southern District of New York in last paragraph.

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Amitoj Singh

Amitoj Singh is a CoinDesk reporter.