SBF was ‘very resistant’ to the investors on the board of FTX: Paradigm co-founder

According to Sam Bankman-Fried, the co-founder and managing partner of the crypto investment firm Paradigm, Matthew Huang was “very reluctant” to allow investors to join the board of directors in FTX.

Paradigm and several venture capital firms, including Sequoia, Temasek, and BlackRock, have come under fire for their investment in FTX, with the now-defunct crypto exchange being publicly scrutinized — and subsequently issuing statements — about its funding.

Huang, who testified on the third day of Bankman-Fried's trial in New York federal court, said he believes that having investors on FTX's board of directors brings nothing to the table.

Huang had a few conversations with Bankman-Fried ahead of Paradigm's surprise $900 million Series B funding round, which closed in July 2021.

Huang said he did not do enough due diligence and relied too heavily on the information provided by Bankman-Fried.

Despite concerns over the lack of formal structure at FTX and its ties to sister hedge fund Alameda Research, Huang said investors were drawn to FTX's rapidly expanding market share in the crypto industry.

Still, he and other investors at Paradigm expressed concern that Banman-Fried may be spending more time on Alameda than FTX, a distraction that could be a detriment to Paradigm's investment.

Additionally, Huang expressed concern that Alameda may be receiving preferential treatment from FTX. If these concerns are true, Huang said he fears the reputational damage to the company.

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Huang said he was led to believe by Bankman-Fried that Alameda would not receive any special treatment at FTX. That same day, FTX co-founder Gary Wang testified that Alameda had been given unlimited capital flows from the exchange.

Additionally, Huang said he had no knowledge of the alleged money transfer between FTX and Alameda Research.

Prosecutors asked Huang if his decision to invest in FTX had changed after he was told the exchange was using customer deposits for investment purposes.

“Yes,” Huang replied. “It is generally understood that customer deposits are sacred.”

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