It’s been a busy week for John J. Ray III and his team.
The man who unwound the Enron disaster, and is now responsible for overseeing the restructuring of the bankrupt crypto exchange FTX’s multibillion-dollar implosion, successfully added more than half a billion dollars to the asset pool for FTX creditors in just the past 48 hours.
Around a fifth of that amount, or $95 million, is tied to a proposed deal, disclosed Thursday (March 23), to sell FTX’s stake in Mysten Labs back to the startup’s founders, former Meta executives.
The share repurchase has not yet been finalized and remains subject to higher bids and court approval. FTX paid $101 million last year for the shares of Mysten, as well as led a funding round, along with Apollo and Lightspeed, that valued the startup at $2 billion.
But the lion’s share of the new haul, or around $460 million, is coming from tiny Bahamas-based Modulo Capital.
Read more: FTX Lawyers Sue to Keep Bahamian Unit Away From Assets
Per court filings, Modulo has agreed to return $404 million in cash that FTX and Alameda staked its hedge fund operations with, as well as release its own claim to $56 million of assets still locked up on the dormant FTX’s crypto exchange.
As part of the settlement, both FTX and Alameda will give up claim to any ownership of Modulo as well as agree not to take any further actions against Modulo or its owners related to the payments.
Founded in early 2022, Modulo operated out of the same luxury Bahamian condominium community, the Albany, where FTX founder Sam Bankman-Fried and other of his employees lived, according to public filings.
But the ties between Bankman-Fried and Modulo ran deeper than just sharing an address.
Read more: FTX Says Bankman-Fried Allegedly Took $2.2 Billion From Alameda
A relatively small, multi-strategy hedge found, Modulo was founded by two former Jane Street traders, Duncan Rheingans-Yoo and Xiaoyun Zhang, who goes by Lily.
Jane Street, a proprietary Wall Street trading firm that undertakes high frequency trading of securities and derivatives, was also where Bankman-Fried cut his post-college teeth in the finance world, before turning to effective altruism and then crypto.
Bankman-Fried’s time at Jane Street overlapped with Zhang’s, and the two were at one point allegedly involved romantically, as relayed by The New York Times.
Alameda, at the direction of Bankman-Fried, paid $25 million to acquire a stake in Modulo and contributed $450 million to an investment fund managed by the fledgling trading firm at a time when FTX was losing money and heading rapidly toward bankruptcy — meaning the transfers were open to being challenged and potentially clawed back as a part of FTX’s bankruptcy process if they were revealed to be made using misappropriated money that FTX customers had deposited with the exchange.
The capital injection was one of Bankman-Fried’s largest investments.
Modulo Capital did not immediately respond to PYMNTS’ request for comment.
See also: Bankman-Fried’s Billions Mirror the Oversight Gaps Torching the Banking Sector
Bankman-Fried has been criminally charged with stealing billions of dollars in FTX customer funds — allegations which he has so far denied, despite several of his top executives admitting their own guilt to similar charges.
He remains free on bail pending his scheduled October trial.
Campaign finance violations are among the allegations Bankman-Fried is facing, as the U.S. government believes the failed crypto founder funneled illegal political contributions to lawmakers using other FTX executives as part of a straw-donor scheme.
As PYMNTS has written, 196 legislators — more than a third of Congress — received donations from FTX. Recipients include Speaker of the House Kevin McCarthy, a California Republican, and Senate Majority Leader Chuck Schumer, a Democrat from New York.
Ray’s current FTX leadership had previously requested lawmakers return the donations by Feb. 28, however that appears to have spurred little action.
Per a recent report by Semafor, federal prosecutors from the U.S. Attorney’s Office for the Southern District of New York are now demanding donations be returned to the U.S. Marshals service rather than FTX itself.
The prosecutors state that the “donations represent the proceeds of Bankman-Fried’s crimes,” and can therefore be clawed back under federal asset forfeiture laws, as relayed by the report.
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