The Wall Street Journal stated that FTX founder Sam Bankman-Fried discreetly sold out $300 million in personal holdings in the middle of a $420 million financing in October 2021.
BREAKING: FTX’s Sam Bankman-Fried cashed out $300 million personally during a $420.69 million raise from 69 investors, per WSJ.
— unusual_whales (@unusual_whales) November 18, 2022
Bankman-Fried informed investors that they will use funds to help build FTX and work more closely with authorities. But the Journal said that a major chunk of the funds was used to cover a month’s earlier acquisition of Binance’s stake in FTX, citing persons familiar with the matter.
The action was unusual in the startup environment since founders seldom saw a profit before investors. According to the Journal, the stock sale in October 2021 was part of a six-month fundraising operation that netted $2 billion from investors like Temasek, Sequoia Capital, and BlackRock and valued FTX at $25 billion.
Binance got $2.1 billion in BUSD and FTT tokens in exchange for its FTX shares. After Binance CEO Changpeng Zhao declared in early November that the business would sell the tokens due to recent disclosures, the FTT tokens seemed to be the impetus for a market tip-off that there was something wrong with FTX.
Further, the resulting FTX fall forced the exchange to close, exposing an $8 billion deficit caused by nefarious activities with Alameda Research, a sibling SBF-founded trading business. As FTX struggled, an agreement to rescue the exchange with Binance fell through. FTX has now filed for Chapter 11 bankruptcy protection, and the papers continue to uncover potentially vulnerable parties.