FTX founder and former CEO Sam Bankman-Fried (SBF) quietly cashed out $300 million (roughly Rs. 2,430 crore) in personal stakes after a $420 million (roughly Rs. 3,410 crore) fundraising in October 2021, as per a recent report. At the time of the fundraising, Bankman-Fried told investors that the raise would be used for things like helping grow FTX and working closely with regulators, but a large portion of the cash was used as a reimbursement for a month’s earlier buyout of Binance’s stake in FTX.
As highlighted by a Wall Street Journal report, the move is being widely criticised as cashing out such a huge amount is taboo in regard to startup-world standards as it allows the founder to reap profit before investors. Note that the $2 billion (roughly Rs. 17,000 crore) capital came during a six-month fundraising effort led by investors like Sequoia Capital, BlackRock, and Temasek. This fundraising valued FTX at $25 billion (roughly Rs. 2,02,950 crore).
Moreover, Binance received $2.1 billion (roughly Rs. 17,050 crore) in the form of BUSD and FTT tokens for its FTX shares. In early November, Binance CEO Changpeng Zhao declared that the business would be selling tokens due to recent revelations. This decision was perceived as an indication that something was wrong with FTX.
Later, the FTX exchange suffered an abrupt collapse, revealing an $8 billion (roughly Rs. 64,940 crore) shortfall as a result of murky dealings. To top it up, FTX filed for Chapter 11 bankruptcy protection. This, understandably, started a series of investigations to reveal potentially exposed parties.
When the FTX crash became a contentious issue among community and government regulators, SBF kept on engaging in disruptive tweets and conversations with reporters disparaging the government authorities.
For this reason, Sam Bankman-Fried’s lawyer, Paul Weiss, dropped the case as Bankman kept on jeopardising his defence by speaking publicly in recent days.