According to the Securities and Exchange Commission (SEC) in the US, $200 million out of the billions of dollars that vanished from the customer funds of the FTX exchange were used for making investments in two companies.
The agency has charged the FTX co-founder, Sam Bankman-Fried, with operating a scheme aimed at defrauding equity investors.
The crypto company used its FTX Ventures unit for making an investment of $100 million back in March in a fintech company called Dave, which had gone public two months earlier via a SPAC (special purpose acquisition company).
The companies had said at the time that they would work together for expanding the ecosystem of digital assets.
The second deal that the SEC was referring to was also worth $100 million that had been invested in a Web3 company named Mysten Labs back in September.
This had been a funding round of $300 million, which had resulted in a $2 billion valuation for Mysten.
Some of the other participants in the funding round included names like Binance Labs, Coinbase Ventures, and the crypto fund of Andreessen Horowitz.
While dozens of transactions were conducted by FTX Ventures, Pitchbook said that the $200 million investments in Dave and Mysten Labs were the only two disclosed that gave some idea of how the firm had used the $5.2 billion.
In the press release that FTX Ventures made with Dave, the former had been referred to as a venture fund worth $2 billion.
The 30-year-old FTX co-founder, Sam Bankman-Fried, has been accused of committing fraud, as his company, which had been valued earlier this year at $32 billion, filed for bankruptcy last month.
One of the main charges filed against him is about how customer deposits on FTX were diverted to Alameda Research, the trading desk he launched.
The funds were said to be used for making risky loans and trades and it has been alleged that the scheme also involved FTX Ventures.
Neither Mysten Labs nor Dave appears to be involved in any of the alleged wrongdoings associated with FTX.
However, the investments are the first example to be identified of how customer funds were used by SBF and FTX for venture funding purposes.
FTX lawyers and investigators are trying to retrace the outflow of funds from the platform, these investments along with others that have been identified in the venture pool worth $5 billion will attract a lot of scrutiny.
Since the SEC has explicitly connected customer funds with the two investments of $100 million each, there is a chance that there could be clawbacks.
If the bankruptcy trustees of FTX are able to establish that these investments were funded with clients’ money, then they could go after those funds in order to retrieve the assets of customers.
Jason Wilk, the CEO of Dave, said that the repayment of the FTX investment is already scheduled for 2026 with interest because the $100 million investment was actually a convertible note.