FTX diverted $200 million of customer money for two venture deals that caught the SEC's attention

Of the billions of dollars successful lawsuit deposits that disappeared from FTX successful a flash, $200 cardinal was utilized to money investments successful 2 companies, according to the Securities and Exchange Commission, which charged laminitis Sam Bankman-Fried with "orchestrating a strategy to defraud equity investors."

Through its FTX Ventures unit, the crypto steadfast successful March invested $100 cardinal successful Dave, a fintech institution that had gone nationalist 2 months earlier done a peculiar intent acquisition company. At the clip of the deal, the companies said they would "work unneurotic to grow the integer assets ecosystem."

The different woody the SEC appears to person referenced was a $100 cardinal concern circular successful September for Mysten Labs, a Web3 company. In total, it was a $300 cardinal funding round that valued Mysten astatine $2 cardinal and included information from Coinbase Ventures, Binance Labs, and Andreessen Horowitz's crypto fund.

While FTX Ventures has done dozens of transactions, according to PitchBook, the Mysten Labs and Dave investments were the lone 2 disclosed investments of $100 million, based connected documents published by the Financial Times, which broke down however the institution enactment $5.2 cardinal to work. FTX Ventures was described arsenic a $2 cardinal task fund, successful its property merchandise with Dave.

Bankman-Fried, 30, stands accused of committing wide fraud aft FTX, which was valued by backstage investors astatine $32 cardinal earlier this year, sank into bankruptcy successful November. A cardinal taxable successful the charges is however Bankman-Fried diverted funds from FTX to his hedge fund, Alameda Research, which past utilized that wealth for risky trades and loans. FTX Ventures was allegedly portion of that scheme.

Neither Mysten nor Dave person been linked to immoderate alleged wrongdoing wrong Bankman-Fried's empire. But the investments appear to be the archetypal identified examples of lawsuit wealth being utilized by FTX and Bankman-Fried for task funding. As investigators and FTX lawyers effort to retrace the outflow of FTX funds, these identified investments and others successful the $5 cardinal task excavation volition pull dense scrutiny.

In explicitly linking the 2 $100 cardinal investments to lawsuit money, the SEC has raised the anticipation that they'll beryllium prospects for clawbacks. If FTX bankruptcy trustees tin found that lawsuit wealth funded Bankman-Fried's investments, they could prosecute betterment of those funds arsenic portion of an effort to retrieve lawsuit assets.

A spokesperson for the SEC declined to comment.

Dave CEO Jason Wilk told CNBC that FTX's concern successful Dave is already scheduled to beryllium repaid, with interest, by 2026. FTX's $100 cardinal concern was done a convertible note, a short-term indebtedness of currency that FTX could person into shares astatine a aboriginal date. That conversion was ne'er made, leaving Dave with a $101.6 cardinal liability, including interest, to FTX and immoderate successor companies, according to the company's astir caller SEC filings.

"The enactment issued to FTX is owed for repayment successful March 2026," the institution said successful a statement. "No presumption contained successful the enactment trigger immoderate existent work by Dave to repay anterior to the maturity date."

Wilk added that, "it is important to authorities we had nary cognition of FTX oregon Alameda utilizing lawsuit assets to marque investments."

Bankman-Fried's concern successful Mysten Labs was an equity deal. Because Mysten is simply a privately held company, there's nary intelligibly defined process successful U.S. bankruptcy codification for clawing backmost those funds.

Mysten declined to comment. Lawyers astatine Sullivan & Cromwell, which represents FTX, did not respond to requests for comment.

An SEC complaint filed against 2 of Bankman-Fried's lieutenants, Caroline Ellison and Gary Wang, specified that "two $100 cardinal investments made by FTX's affiliated concern vehicle, FTX Ventures Ltd., were funded with FTX lawsuit funds that had been diverted to Alameda."

Irrespective of what wealth was being used, FTX's investments were ill-timed.

Dave shares person plummeted implicit 97% since the institution went public, mirroring the show of the broader handbasket of SPACs, which has plunged this year. In July, the Nasdaq warned Dave that if its stock terms didn't improve, it was astatine hazard of being delisted. The banal presently trades for 28 cents and the marketplace headdress sits astatine astir $100 million.

Alameda Research had antecedently made a $15 cardinal concern successful Dave successful August 2021, earlier the Nasdaq listing. Dave was founded successful 2016 and offers customers a free currency advance connected their aboriginal income arsenic portion of a suite of banking products. Mark Cuban led a $3 cardinal effect round successful 2017.

The concern could person been lucrative for FTX if Dave's stock terms had improved beyond $10 a share, allowing FTX to person astatine a profit.

FTX's concern successful Mysten came successful the midst of a crypto meltdown. Bitcoin and ether were down by much than fractional for the twelvemonth and galore hedge funds and lenders had gone bankrupt.

The funds were to beryllium utilized successful Mysten's effort to "build a blockchain that scales with request and incentivizes growth," Mysten CEO Evan Cheng said astatine the time.

Representatives for Ellison and Wang did not respond to requests for comment. A typical for Bankman-Fried declined to comment.

Ellison, 28, and Wang, 29, pled blameworthy successful New York past week to national charges implicit the illicit usage of lawsuit funds for trading and task investments, allegedly directed by Bankman-Fried. Both are cooperating with federal investigations into Bankman-Fried and the illness of FTX.

WATCH: The presumption of the $250 cardinal bail statement for FTX laminitis Sam Bankman-Fried