FTX Launches Legal Battle to Retrieve $400 Million from JPMorgan: New York Times

FTX crypto exchange is reportedly negotiating the return of a $400 million investment made by its founder, Sam Bankman-Fried, in Modulo Capital, a relatively unknown hedge fund. According to sources cited by The New York Times, FTX’s new leadership is in talks with Modulo to recover the funds.

Modulo is a multi-strategy hedge fund that was founded in 2022 by two former traders from Jane Street, a proprietary trading firm where Bankman-Fried worked before venturing into the crypto industry.

The fund’s holdings were converted to cash and placed in an interest-bearing account with JPMorgan, its prime broker, following FTX’s collapse.

The report suggests that Modulo is seeking to be released from certain legal liabilities in exchange for the return of the funds. FTX and its sister company Alameda resided in the same luxury condominium complex as Modulo and operated from the Bahamas, according to public filings.

The fund’s two founders, Duncan Rheingans-Yoo and Xiaoyun Zhang, recently hired a criminal defense lawyer to represent them in the matter.

The US government reportedly wants to take control of nearly $700 million of assets seized from Bankman-Fried in January, although it’s unclear why the Modulo funds have not been seized.

Representatives for FTX, JPMorgan, and the US Attorney’s Office for the Southern District of New York declined to comment on the matter when contacted by The New York Times.

The situation highlights the potential risks associated with investing in little-known hedge funds and the importance of conducting thorough due diligence before making any investments.

With the ongoing legal battle surrounding FTX and Bankman-Fried, investors will likely be keeping a close eye on the outcome of the negotiations with Modulo.