FTX in talks to return $400 million from obscure hedge fund
Federal prosecutors in Manhattan also seized assets that were purchased with funds embezzled from FTX customers' accounts. Prosecutors announced last month that they had seized more than $600 million in assets from Mr. Bankman-Fried, including cash and stocks held in bank and brokerage accounts.
It is unclear why prosecutors did not seize Modulo's funds at JP Morgan. Representatives for FTX, JPMorgan and the U.S. Attorney's Office for the Southern District of New York declined to comment. A spokeswoman for Modulo's two founders, Duncan Reinkens-Yu and Xiayun Zhang, known as Lily, declined to comment.
FTX filed for bankruptcy in November after a rush of deposits left an $8 billion hole in its accounts. Mr. Bankman-Fried, 30, stepped down as chief executive and handed over the reins to a new management team.
In December, federal prosecutors in Manhattan charged Mr. Bankman-Fried with fraud, money laundering and campaign finance violations. He is accused of using billions of dollars in customer deposits to buy luxury homes, make political donations and issue stock in other companies. Two of his closest associates pleaded guilty and are cooperating with authorities.
The aftermath of FTX’s demise
The crypto exchange’s spectacular collapse in November left the industry stunned.
Soon, the prosecution began questioning Modulo. A 2012 graduate of Amherst College, Ms. Zhang worked for Jane Street, an international private trading company, for ten years before founding Modulo. Sir Reinkens-U also worked for Jane Street and joined it in 2020 after graduating from Harvard.
Mister started his career on Jane Street. Ms. Zhang and Mr. Das Rheingens-U have close personal relationships with Bankman-Fried. Modulo was founded last spring in the Bahamas, where FTX also operates. And it was run from the same luxury resort on the island of New Providence in the Bahamas where Mr. Bankman-Fried lived with some of his first assistants.
The $400 million deal raised suspicions because Mr. Bankman-Fried had invested in FTX shortly before the explosion. Following his arrest in December, a local Bahamian lawyer argued at a bail hearing that the FTX founder could have withdrawn the funds sent to Modulo, putting him at risk of absconding. In the January 17 lawsuit, FTX's lawyers identified a $400 million investment in Modulo as the target of the bailout.