SBF was ‘very resistant’ to investors on FTX board: Paradigm co-founder
Sam Bankman-Fried was “very resistant” to having investors join the board of directors at FTX, claims Matthew Huang, the co-founder and managing partner of crypto investment firm Paradigm.
The sudden collapse of FTX saw more than a few investors burned, with Paradigm joining a number of venture capital firms including Sequoia, Temasek and BlackRock in funding the rise of the now-bankrupt crypto exchange.
Testifying on the third day of Bankman-Fried’s trial in a New York Federal Court, Huang claimed Bankman-Fried believed having investors on FTX's board of directors wouldn’t bring much to the table.
Huang engaged in a handful of conversations with Bankman-Fried ahead of Paradigm making a $125 million investment in the exchange’s staggering $900 million Series B funding round it closed in July 2021.
Huang admitted to not conducting enough due diligence and that he relied too heavily on information supplied by Bankman-Fried.
Despite being concerned by the lack of formal structure at FTX and its potential entanglement with its sister hedge fund Alameda Research, Huang said investors were lured in by the rapid expansion of FTX's market share in the crypto industry.
Still, Huang noted he and other investors at Paradigm were concerned that Bankman-Fried may have been spending more time working on Alameda instead of FTX, a distraction that would have been at the expense of Paradigm’s investment.
Additionally, Huang noted there were concerns that Alameda may have been receiving preferential treatment from FTX. If these concerns turned out to be true Huang said he was fearful of the reputation damage it may inflict on the company.
Related: College roommate talked to Sam Bankman-Fried about FTX’s $8B hole on a paddle tennis
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