Executives at a serious lender to Sam Bankman-Fried’s defunct hedge fund had privileged early entry to issuances of latest tokens backed by the disgraced entrepreneur’s crypto alternate FTX, the Monetary Occasions has discovered.
Genesis, a number one crypto lender that collapsed in January, was lengthy a key supply of funding for Alameda Analysis, the buying and selling agency on the coronary heart of Bankman-Fried’s alleged theft of buyer property from FTX.
The shut relationship included alternatives for some Genesis executives to spend money on cryptocurrencies Bankman-Fried helped launch, at a reduced fee earlier than the tokens had been issued to the general public, based on individuals aware of the matter.
The entry highlights the previous closeness of the teams, each now in chapter, and the broader intertwined nature of the crypto trade, which is dominated by a small variety of firms with varied overlapping investments and pursuits.
Genesis’s lending unit failed earlier this 12 months after struggling losses from the failure of Bankman-Fried’s crypto empire and one other collapsed crypto hedge fund, Three Arrows Capital. Genesis is FTX and Alameda’s greatest creditor and is owed $226mn, based on US chapter courtroom data.
Former Genesis staff mentioned Bankman-Fried gave some executives on the lender the chance to spend money on “presale” tokens of FTT, the FTX native token that launched in 2019, and Serum, which launched in 2020 with backing from FTX and Alameda.
The presale entry to FTT and Serum, additionally provided to others outdoors Genesis inside Bankman-Fried’s community of trade contacts, gave the Genesis executives a possibility to revenue after retail buyers purchased in.
It’s unclear how widespread the entry was inside Genesis. One former govt instructed the FT they had been unaware of any such presents from FTX.
Crypto token choices to retail buyers lately sometimes adopted early funding rounds involving enterprise capital and different buyers. In return for a reduced value, the early buyers typically agreed to not promote the tokens for a interval that might vary from a number of months to years.
On launching FTT, FTX provided some Genesis executives presale entry by a “very normal” one-page providing, a second former Genesis govt mentioned.
They determined to not spend money on FTT, however later rued their determination when the worth of the token surged, the previous govt added. “That was a giant miss,” the individual mentioned.
Additional alternatives adopted, together with Serum, a venture launched on the Solana blockchain community with backing from FTX and Alameda. Solana itself was additionally championed by Bankman-Fried.
“The one motive we invested in Serum is we missed FTT,” the previous Genesis govt mentioned. At launch in August 2020, Serum’s value spiked 1,500 per cent.
Thomas Braziel, co-founder of 507 Capital, which has purchased claims in a number of crypto bankruptcies together with Genesis and FTX, mentioned the revelations raised questions on Genesis’s lending and whether or not there had been a “bizarre quid professional quo” with Alameda.
Braziel added the observe was constant along with his understanding of how Bankman-Fried operated. “He actually took care of people that he thought had been essential to him . . . He was doing an excellent job of retaining all people’s bread buttered.”
FTX and Alameda, now underneath new joint administration in chapter, didn’t reply to a request for remark. Genesis didn’t reply to requests for remark. A spokesperson for Bankman-Fried declined to remark.
US-based Genesis launched in 2013 and is a part of SoftBank-backed Digital Forex Group, one of many oldest buyers in crypto firms. Genesis’s lending arm launched in 2018 and have become a serious supply of credit score for crypto ventures, originating $131bn value of loans in 2021.
Genesis’s $226mn publicity to Bankman-Fried’s ventures after they collapsed had beforehand been a lot bigger, however in the summertime of 2022 Alameda repaid loans to Genesis and different lenders as crypto markets faltered. US authorities have accused Bankman-Fried of repaying Alameda’s collectors in 2022 with funds from FTX with out telling them the true supply of the cash.
Bankman-Fried has denied any wrongdoing.
A Genesis entity, GGC Worldwide Ltd, is on the official committee of unsecured collectors within the FTX and Alameda joint-bankruptcy course of.
The FTT and Serum tokens, together with Solana, had been additionally accepted by Genesis as collateral pledged by Alameda to safe its borrowings, based on individuals aware of the connection.
Alameda was greater than only a supply of direct mortgage demand for Genesis, based on a former Genesis worker who mentioned the hedge fund referred purchasers to the lender. “It was an amazing pipeline for us,” they mentioned.
Extra reporting by Joshua Oliver
