FTX made two $100 million venture investments with user funds via an FTX subsidiary.
The deals raise concerns about potential clawbacks or conveyance complications for FTX bankruptcy attorneys and individual clients.
FTX invested $200 million of user funds in two companies.
Based on a recent CNBC report, the company invested $100 million in Dave, a fintech company that went public earlier this year, through its FTX Ventures unit. The companies stated at the time that they will "collaborate to build the digital assets ecosystem."
The other deal announced by the SEC was a $100 million financing round for Mysten Labs in September. FTX Ventures led the investment round. Along with Binance Labs, Coinbase Ventures, Circle Ventures, a16z Crypto, Jump Crypto, Apollo, Franklin Templeton, and Lightspeed Venture Partners, the event was attended by a number of other investors.
Mysten and Dave have never been accused of any misconduct within SBF's empire. The transactions appear to be the first documented instances of FTX using customer funds for venture capital.
Meanwhile, as investigators and FTX lawyers try to track down the outflow of FTX funds, the highlighted investments and others in the $5 billion venture pool are expected to be scrutinized closely.
As per CNBC, the SEC has specifically said that the aforementioned investments are "prospects for clawbacks." However, if FTX bankruptcy trustees can demonstrate that client funds backed the investments, they may be able to reclaim those funds in an effort to recover customer assets.
Dave CEO Jason Wilk told CNBC that the investment in the fintech startup is already slated to be repaid with interest by 2026. The $100 million investment by FTX was made in the form of a convertible note. However, the conversion was never completed. This leaves Dave with a $101.6 million liability to FTX and any successor firms, including interest. In a statement, the company said,
“The FTX note is expected to be repaid in March 2026. No clauses in the note impose any current responsibility on Dave to repay before the maturity date."
Furthermore, the executive stated that Dave had no knowledge of FTX or Alameda using user funds to make investments.
The investment in Mysten Labs was an equity transaction. Because Mysten is a privately held company, there is no clearly established method in the US bankruptcy code for recovering those funds, reported CNBC.
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