Recently, Matthew Huang, co-founder and managing partner of crypto investment company Paradigm, testified in New York federal court that FTX founder Sam Bankman-Fried was “very resistant” to investors joining FTX’s board of directors. Huang admitted that Paradigm did not conduct sufficient due diligence before making its $125 million investment in FTX and relied too much on information provided by Bankman-Fried.

Huang said investors were attracted by FTX’s rapid expansion of market share in the crypto industry, despite concerns about its lack of formal structure and its potential entanglement with sister hedge fund Alameda Research. However, he and other Paradigm investors were concerned that Bankman-Fried might spend more time on Alameda instead of FTX, a distraction that would come at the expense of Paradigm's investment.

Additionally, Huang noted that there are concerns that Alameda may have received preferential treatment from FTX. If those concerns prove to be true, Huang said he worries it could cause reputational damage to the company.