FTX Looks to Recover $400M From Hedge Fund Modulo

FTX is reportedly negotiating the return of $400 million invested by its disgraced founder.

Sam Bankman-Fried invested that money in Brazilian hedge fund Modulo Capital, the New York Times reported Wednesday (Feb. 15), citing sources familiar with the matter. 

The sources say Modulo is negotiating with FTX to return the funds, which are now being held in an interest-bearing account with J.P. Morgan Chase. The report adds that Modulo has gotten the attention from prosecutors, although there’s no indication the fund has done anything wrong.

According to one of the sources, Modulo wants FTX to release them from certain legal liabilities in exchange for returning the funds.

PYMNTS has reached out to Modulo for comment but has yet to receive a reply.

Last month, FTX said it had recovered $5.5 billion in assets, a sum that stands against an unofficial estimate of more than $8 billion in liabilities. The Times report noted that getting the $400 million would be a “coup” in this case, as many of those recovered assets were in the form of cryptocurrencies whose value isn’t clear.

The news comes 10 days after FTX management began the legal process of recovering the millions in political donations made by Bankman-Fried. 

“To the extent such payments are not returned voluntarily, the FTX Debtors reserve the right to commence actions before the bankruptcy court to require the return of such payments, with interest accruing from the date any action is commenced,” the company said in a news release, giving recipients until the end of the month to return donations.

Meanwhile, another legal battle involves a multi-party dispute over 55 million shares in the trading platform Robinhood, worth — as of Wednesday morning — $575 million.

Bankman-Fried purchased the shares last year through his company Emergent Financial Technologies. They were seized last month by the Justice Department as part of its prosecution of the FTX founder.

Bankman-Fried, 30, has been charged with multiple counts of fraud and conspiracy connected to the implosion of FTX. He has pleaded not guilty and has said he needs the Robinhood shares to fund his defense.

“Mr. Bankman-Fried has not been found criminally or civilly liable for fraud, and it is improper for the FTX Debtors to ask the Court to simply assume that everything Mr. Bankman-Fried ever touched is presumptively fraudulent,” his attorneys said in a court filing.

Other parties say they also have a right to the shares, including FTX, Emergent — which filed for bankruptcy last week — crypto lender BlockFi and Robinhood itself.