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The Unknown Hedge Fund That Got $400 Million From Sam Bankman-Fried

Not long before FTX collapsed in November, its founder, Sam Bankman-Fried, sent $400 million to an obscure cryptocurrency trading firm called Modulo Capital.

The fledgling firm, which was founded in March and operated out of the same Bahamian compound where Mr. Bankman-Fried lived, had no track record or public profile. One of the founders, Duncan Rheingans-Yoo, was only two years out of college. His business partner, Xiaoyun Zhang, known as Lily, was a former Wall Street trader who had previously been romantically involved with Mr. Bankman-Fried, according to four people with knowledge of their relationship.

Now, Modulo is emerging as a crucial part of the investigation by federal prosecutors into Mr. Bankman-Fried and his once giant cryptocurrency exchange. They’re examining whether he used FTX’s customer funds to invest in the little-known firm when his existing hedge fund, Alameda Research, was struggling amid a wider crypto industry downturn. The $400 million outlay was one of Mr. Bankman-Fried’s single largest investments.

At the same time, lawyers for FTX’s new leadership are eyeing Modulo’s assets as they scramble to recover the billions of dollars that customers, lenders and investors lost when the exchange imploded.

It’s unclear how much of FTX’s $400 million investment remains or where it is. But the authorities have been aware of the trading firm for months; the day after Mr. Bankman-Fried was arrested in the Bahamas in mid-December, he was denied…

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