Did Sam Bankman-Fried in Effect Pay VC Firms Like Paradigm to Invest in FTX in a Circular Funding Arrangement?
New revelations indicate that there were some close links between Sam Bankman-Fried, the disgraced founder of collapsed cryptocurrency exchange FTX, and some of his major backers.
According to a new report by the Financial Times, Bankman-Fried invested $20 million in a fund managed by crypto venture capital firm Paradigm in late 2021. The same fund later invested in FTX and FTX US exchanges.
“That’s just weird,” Charles Whitehead, a professor at Cornell Law School, reportedly said in a comment. He added that while there was “nothing inherently wrong” with such arrangements, “it raises your eyebrows”.
Founded in 2018, Paradigm is a major venture capital firm that invests in cryptocurrency, financial services, information technology, media, telecommunication, SaaS, and web3 sectors.
A spokesperson for the San Francisco-based company has allegedly claimed that the VC had made a general conflicts-of-interest disclosure to investors in Paradigm One that said the fund may invest in companies run by its limited partners.
Aside from Paradigm, there are also other examples of SBF investing in specific funds that then backed his FTX businesses.
For instance, the disgraced crypto boss invested $5 million in a fund launched by UVM, an arm of Singaporean bank United Overseas Bank, and Signum Capital through his trading firm Alameda. The fund later invested in FTX, the FT reported.
In December, it was revealed that SBF invested hundreds of millions of dollars into VC funds run by firms such as Sequoia Capital which also backed FTX. Alameda also had smaller investments in funds run by FTX venture capital backers Paradigm, Altimeter Capital Management, Sino Global Capital and Multicoin Capital
As reported, Bankman-Fried was arrested in The
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