by Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, who is facing eight counts of fraud, conspiracy, money laundering and illegal campaign contributions, has invested in at least two Israeli startups, StarkWare and Solidus Labs, through his companies FTX Ventures and Alameda Research.
StarkWare and Solidus received funding that US investigators say Bankman-Fried and her colleagues obtained through extensive fraud and theft of customer funds. The two Israeli-founded companies are part of a list of about 500 companies in which Bankman-Fried, which was handed over from the Bahamas to the United States last week, had holdings worth a total of about $5.4 billion.
According to US authorities, FTX stole a total of $10 billion in client funds, some of which Alameda lost through risky trades and some of which were used to purchase luxury real estate for personal use, political and social donations, and investments in crypto, trade and media organizations.
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Sam Bankman-Fried on his way to court.
(Photo: Stephanie Keith/Bloomberg)
The portfolio list of 500 companies first published by the Financial Times was across 10 different companies and was used as collateral by FTX in November in its latest attempt to raise funding and avoid bankruptcy. The largest holdings include stakes in crypto mining company Genesis Digital, VC giant Sequoia, Anthony Scaramucci’s investment company SkyBridge and SpaceX.
Companies controlled by SBF invested at least $14 million in StarkWare over three funding rounds, including its last two rounds, according to the list. StarkWare, which develops scalability and privacy solutions for blockchain technology, raised $100 million last May at a valuation of $8 billion. Netanyahu’s company raised $50 million at a $2 billion valuation last November.
StarkWare was founded in 2018 by Uri Kolodny (CEO), Eli Ben-Sasson (President), Michael Riabzev (Chief Architect) and Alessandro Chiesa (Chief Scientist). The company aims to use zero-data proofs to solve the inherent problems of blockchains. The company employs more than 80 people, most of them from the Netanya office.
SBF also bought Starknet tokens, which are still not traded, for a total of at least $33,000. In addition to Alameda, StarkWare’s investors also include Greenoaks Capital, Coatue, Sequoia, Founders Fund, Paradigm and Three Arrows, which has also since gone bankrupt.
The investment in Solidus Labs was smaller and believed to be around $500,000, made during the company’s $20 million Series A round in May 2021. The company also raised a $45 million Series B round last May, led by Liberty City Ventures, including Evolution Equity. Partners, Declaration Partners, Hanaco Ventures and Avon Ventures.
Solidus was founded in 2017 by Asaf Meir, Chen Arad and Praveen Kumar. It employs around 100 people, mostly in Israel, and offers a crypto-native risk monitoring suite serving crypto and DeFi platforms, financial institutions and regulators. FTX was one of the company’s customers.
FTX’s new management has already stated that it expects to recover all political donations from SBF, but the likely outcome for the money invested in companies such as StarkWare and Solidus is that the companies will either be sold or buy back stakes.
StarkWare declined to comment. Stating that the services provided by the firm are not related to FTX’s risk management and eventual collapse, Solidus said: “FTX has invested less than 1% of the funding Solidus has received to date, along with many investors, including former regulators, banks, financial institutions and venture capital funds. The company has always called for more crypto regulation.
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