After a $420 million fundraising in October 2021, FTX founder and former CEO Sam Bankman-Fried (SBF) quietly cashed out $300 million in personal stakes, says the report.
At the time of the fundraising, Bankman-Fried told investors that capital will be used for things like helping grow FTX and coordinating efficiently with regulators. However, the large chunk of the cash was used as a reimbursement for a month earlier buyout of Binance’s stake in FTX.
The move is being widely criticized as cashing out such a huge amount is taboo in regard to startup-world standards because it allowed the founder to reap profit before investors. Note that the $2 billion capital came during a six-month fundraising effort led by investors like Sequoia Capital, BlackRock, and Temasek. This fundraising valued FTX at $25 billion.
Moreover, Binance got $2.1 billion in the form of BUSD and FTT tokens for its FTX shares. In early November, Binance CEO Changpeng Zhao declared that the business would be selling tokens due to recent revelations. This decision was perceived as an indication that something was wrong with FTX.
Later, the FTX exchange suffered an abrupt collapse, revealing an $8 billion shortfall as a result of murky dealings. To top it up, FTX filed for Chapter 11 bankruptcy protection. Well, the story didn’t end here. This, understandably, started a series of investigations to reveal potentially exposed parties.
When the FTX crash became a contentious issue among community and government regulators, SBF kept on engaging in disruptive tweets and conversations with reporters disparaging the government authorities.
For this reason, Sam Bankman-Fried’s lawyer, Paul Weiss, dropped the case as Bankman kept on jeopardizing his defense by speaking publicly in recent days.
