When FTX raised $420 million from investors in October 2021, $300 million of that amount reportedly went to the cryptocurrency exchange’s then-CEO Sam Bankman-Fried.
The money went toward buying some of Bankman-Fried’s stake in the company, even as FTX said the fundraise would be used to grow the business, The Wall Street Journal (WSJ) reported Friday (Nov. 18).
Bankman-Fried told investors at the time that the money was going toward partially reimbursing him for the cost of buying the 15% stake in FTX held by the company’s rival, Binance, according to the report.
Venture-capital investors usually discourage founders from selling a large amount of stock before a company goes public, but that changed over the last decade as investors tried to get involved with the then-hot competition of startup investing, the report said.
FTX did not immediately respond to PYMNTS’ request for comment.
The report comes a day after Bloomberg reported that FTX-affiliated trading firm Alameda research made $4.1 billion in combined loans to “related parties,” with the majority going to Bankman-Fried, one of his majority-owned companies and two other executives.
The implosion of FTX came about after it was revealed that the company used customer funds to bail out Alameda Research — to the tune of around $10 billion — after Alameda itself suffered heavy losses due to trading strategies dating back to April 2021. Exchanges must back their customer funds 1:1 to ensure and insure liquidity.
On the same day, Thursday (Nov. 17), John J. Ray — appointed CEO of FTX last week as part of the company’s bankruptcy proceedings — said he’s never seen a company as badly run as FTX.
FTX and about 130 of its affiliated companies filed for Chapter 11 bankruptcy protection last week following a liquidity crisis, investigations by U.S. regulators and the cancellation of a possible purchase by Binance.
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