FTX Investors Resistant to Joining Board of Directors, Testifies Paradigm Co-founder
During the trial of FTX CEO Sam Bankman-Fried in a New York Federal Court, Matthew Huang, the co-founder and managing partner of crypto investment firm Paradigm, testified that Bankman-Fried was reluctant to have investors join FTX’s board of directors. Huang revealed that Paradigm and other venture capital firms, including Sequoia, Temasek, and BlackRock, faced scrutiny for their investment in the now-bankrupt crypto exchange.
Insufficient Due Diligence and Concerns
Huang admitted that he did not conduct enough due diligence before Paradigm invested $125 million in FTX’s Series B funding round. He relied heavily on information provided by Bankman-Fried. Despite concerns about FTX’s lack of formal structure and its potential connection with sister hedge fund Alameda Research, investors were enticed by the rapid market share expansion of FTX in the crypto industry.
Allegations of Preferential Treatment
Huang expressed concerns about Bankman-Fried’s potential focus on Alameda Research instead of FTX, which could have impacted Paradigm’s investment. There were also worries that Alameda was receiving preferential treatment from FTX. However, Huang stated that Bankman-Fried assured him that Alameda did not receive any privileged treatment from the exchange.
Lack of Knowledge on Fund Commingling
Huang acknowledged that he had no knowledge of the alleged commingling of funds between FTX and Alameda Research. When asked if his decision to invest would have changed if he knew about the alleged use of customer deposits for investments, Huang replied affirmatively, stating that customer deposits are considered sacred.
Hot Take: Paradigm Co-founder Testifies About FTX’s Investor Relations
In the trial of FTX CEO Sam Bankman-Fried, Paradigm co-founder Matthew Huang testified about the resistance to investors joining FTX’s board of directors. Huang admitted to insufficient due diligence and concerns about Alameda Research receiving preferential treatment. He also expressed worries about Bankman-Fried’s focus on Alameda instead of FTX. The trial sheds light on the challenges faced by investors in the crypto industry and highlights the importance of thorough research before making investment decisions.
By
By
By
By