When a spreadsheet of Sam Bankman-Fried’s risk investments was published by the Financial Times earlier this month, a few lines stood out. They showed that the hedge fund of the former cryptocurrency kingmaker, Alameda Research, had invested a total of $400 million in a company called Modulo Capital.
While this amounted to one of Bankman-Fried’s largest venture capital bets, Modulo’s identity was a mystery, prompting much speculation. Was it a Brazilian fund manager with an almost identical name (except for an accent mark above the first letter O)?
No. It is a multi-strategy hedge fund founded early this year by two former Jane Street traders and a developer, a person familiar with the matter told CoinDesk.
Modulo Capital did not respond to a request for comment, nor did Bankman-Fried or former Alameda CEO Caroline Ellison.
However, Modulo has more in common with Bankman-Fried than some of Alameda’s other venture investments.
Jane Street is a New York-based proprietary trading company where Bankman-Fried and Ellison worked before making it big in the crypto industry. Bankman-Fried was known to hire former Jane Street employees as executives or employees, including former FTX US president Brett Harrison.
Public records also show that Modulo was based in the Bahamas and operated out of Albany, the same luxury condominium complex where Bankman-Fried and other FTX and Alameda employees lived.
Read more: Bankman-Fried’s clique of roommates in the Bahamas ran his crypto empire — and dated. Other employees have many questions
Modulo traded both crypto and traditional financial assets, said two people familiar with the matter. Modulo approached several traditional financial institutions for funding before taking on Alameda as its sole investor, one of the people added. A person familiar with the matter confirmed that Alameda has indeed invested $400 million in Modulo.
“It didn’t seem so crazy to me. Sam liked to throw money at things that were positive [expected value] and ex-Jane Street folks seem relatively positive EV,” the person told CoinDesk. “It was better than some of the garbage that Alameda threw money at.”
Alameda’s investments are under heavy scrutiny as creditors await repayment of a grueling bankruptcy proceeding involving the company and its sibling, crypto exchange FTX. In testimony last week before the US House Financial Services Committee, new FTX CEO John J. Ray III said the shortfall was estimated at $8 billion and that “a complete lack of administration” made it challenging to trace the money trail .
The list of investments on the spreadsheet also led to shocking revelations about how far Bankman-Fried’s ties stretched, including speculation about whether or not his money was improperly used to buy influence or enrich associates. In addition to the $400 million Modulo investment, Alameda also lent $43 million to the CEO of crypto news outlet The Block, invested $25 million in Toy Ventures — a venture capital fund founded by FTX product head Ramnik Arora — and acquired a $270 million stake in the US Securities and Exchange Commission-approved exchange IEX.
CORRECTION (December 19, 2022, 21:19 UTC): The Modulo Capital trio included two former Jane Street traders and one developer, not three traders.