FTX, the cryptocurrency exchange founded by Sam Bankman-Fried, was in talks with potential investors like BlackRock and Google as it faced financial challenges in November. Evidence of these discussions was presented in Bankman-Fried’s ongoing criminal trial, where he faces seven fraud and conspiracy charges related to his conduct at FTX. Federal prosecutors submitted a spreadsheet during the trial that was maintained by a now-defunct exchange linked to its fundraising efforts.
FTX document shows different fundraisers
The document contained information about various fundraising rounds, including one that, as FTX’s former general counsel Can Sun testified, “never closed.” The spreadsheet revealed that FTX’s C1 funding round commenced in the late summer and fall of 2022. It listed 15 potential investors to engage promptly, including prominent names like BlackRock, Google, and Apollo. Sun specifically mentioned discussions with Apollo, indicating that the firm had been asked to invest in FTX to address liquidity issues related to customer withdrawals. The spreadsheet also noted a “medium” chance that BlackRock and Google would participate in the funding round.
Both companies were reportedly conducting due diligence on FTX before the exchange ultimately collapsed on November 11. Sam Bankman-Fried stands accused of defrauding customers by using billions of dollars in customer funds for loans to insiders, political donations, venture investments, and real estate purchases. He is also facing allegations of misleading FTX’s investors, which has led to a separate SEC lawsuit. The document indicated that there was an equal chance of participation from Google, BlackRock, venture capital firm NEA, and the Qatar Investment Authority in the funding round.
Additionally, the spreadsheet categorized Temasek and Standard Crypto as “high” probability investors. While BlackRock had previously invested $24 million in FTX, CEO Larry Fink had confirmed this investment. Google, on the other hand, did not directly invest in Bankman-Fried’s companies but shared a cap table with him. It’s worth noting that in February, Google announced a $400 million investment in the AI startup Anthropic, a venture that Bankman-Fried’s trading firm, Alameda Research, had also backed. The spreadsheet also indicated that six firms, including a16z and General Atlantic, had “declined” to participate in the mid-2022 funding round.
Sam Bankman-Fried continues to battle legal woes
Interestingly, Vanderbilt University was listed as a committed participant with a $5 million contribution, just below Columbia and Harvard on the spreadsheet. However, Can Sun, the former general counsel, revealed during his testimony that the funding round had never actually closed, and “investors did not put money into FTX” as part of the failed C1 funding round. Former Alameda CEO Caroline Ellison, who has pleaded guilty to several charges connected to the case, testified that Sam Bankman-Fried attempted to raise capital by selling FTX equity in October 2022.
Although this wasn’t reflected in the spreadsheet, Ellison stated that Saudi Arabia’s Crown Prince, Mohammed bin Salman, had considered purchasing equity in FTX. However, it ultimately did not materialize. Earlier in Bankman-Fried’s trial, Matt Huang, co-founder of Paradigm, discussed a $278 million investment in FTX that his firm had “marked to zero.” He explained that had Paradigm known about Alameda’s ability to access FTX customer deposits, it would have raised concerns. The sanctity of customer deposits is a fundamental principle in the financial industry.
It also shows that any deviation from this standard could have significant implications for potential investors. The evidence presented during the trial sheds light on the challenges faced by FTX, including discussions with major financial players like BlackRock and Google amidst mounting legal issues. Sam Bankman-Fried’s legal troubles, including allegations of fund misappropriation and misleading investors, have brought a wave of scrutiny to the cryptocurrency industry. The trial continues to uncover the complex web of financial dealings and negotiations surrounding FTX and its founder.