Illustrated by Maura Roche/Axios
Sam Bankman-Fried was a big investor in the two years before FTX collapsed, pouring billions into startups and venture capital funds.
Important reasons: Many of these recipients are wondering what will happen next and if they can get their money back.
Big picture: Bankman-Fried’s investment portfolio is complex and probably not yet fully understood.
- But it appears to include over 100 deals from Alameda Research Ventures and over 80 deals from FTX Ventures (despite the sounding name of corporate VCs, they were personal investment vehicles).
Zoom out: Clawback concerns are understandable given the increased likelihood of fraudulent charges, but they are unlikely to materialize.
- After Bernie Madoff fell, many of his clients got their investment returns even though they themselves hadn’t done anything wrong. In short, they were receiving what lawyers call “fraudulent transfers,” or proceeds transferred at less than fair market value.
- Clawbacks can also occur if it is determined that there has been a so-called “preferred transfer” within 90 days of filing for bankruptcy. It relates to payments to creditors or transfers of assets.
neither applies For SBF and FTX, according to several attorneys who spoke with me for background.
- The investment itself was made at a fair market value (even if its value has since declined), so it is not a fraudulent transfer. In addition, there are also resulting assets such as equity, digital tokens and limited partnership positions.
- It is not a preferential transfer because there is no (or at least usually no) liability attached to a startup equity investment.
Cane to avoid falling: This does not necessarily mean that the person with the SBF funds is out of the woods, just in case some enterprising lawyer calls him, formally or informally. Some have segregated their investments in
To the point: Investments are expected to be sold by a liquidator or offered an opportunity for some issuers to buy back shares with proceeds paid to creditors. But it can take months or years to get it right.
