Sam Bankman-Fried’s $200M Venture Investments With Users’ Funds Has Drawn SEC’s Scrutiny

According to reports, of the billions of dollars in client deposits that suddenly vanished from FTX, about two hundred million dollars were utilized by Sam Bankman-Fried “SBF” to support investments in two firms that have attracted the attention of the Securities and Exchange Commission.

In March, the cryptocurrency business invested $100 million in Dave, a fintech startup that had gone public two months earlier via a special purpose acquisition company. 

The other transaction was an investment round for Mysten Labs, a Web3 startup, in the amount of $100 million that took place in September.

Both investments were made through the FTX Ventures division of the cryptocurrency company. The companies made statements at the time indicating that they will collaborate with one another to broaden the ecosystem of digital assets.

According to Jason Wilk, CEO of Dave, the investment made by FTX is already slated to be returned, along with interest, by the year 2026. The investment was made in the form of a convertible note, which is a kind of cash loan with a short-term duration that FTX has the ability to convert into shares at a later date.

The investment that Bankman-Fried made in Mysten Labs was in the form of an equity purchase. Due to the fact that Mysten is a privately owned firm, the United States Bankruptcy Code does not provide a procedure that is clearly established for recovering such money. In addition, the business has not provided any comment about FTX or the investment.

Will the SEC Get the Money Back and Repay Back Users?

Both Mysten and Dave have been implicated in any misconduct that is said to have occurred inside the SBF enterprise. However, it seems that these investments represent the first instances of customer funds being utilized by FTX and its criminal of a founder for venture funding.

The SEC has increased the likelihood that the two investments totaling one hundred million dollars would be subject to a clawback after specifically tying those investments to consumer funds. 

In the event that the trustees of the FTX bankruptcy can demonstrate that customer money were used to finance SBF’s investments, they will be able to seek the recovery of customer cash as part of their endeavor to recoup customer assets.