Temasek writes off $275 mln funding in FTX, says found no red flags during due diligence

Key Takeaways

  • Temasek states it had written off its full investment in FTX, irrespective of the outcome of FTX’s bankruptcy protection filing.
  • The firm said the total cost of its investment was only a negligible 0.09% of its net portfolio value of $293 billion USD.
  • Temasek notes before investing it conducted “extensive due diligence” on FTX from February to October 2021

Singapore’s state investment fund Temasek had stated it had written off its entire $275 million investment in bankrupt crypto exchange FTX. “In view of FTX’s financial position, we have decided to write down our full investment in FTX, irrespective of the outcome of FTX’s bankruptcy protection filing,” Temasek’s official statement reads.

Temasek invested $210 million USD in FTX international, giving the fund a minority stake of 1%. It further invested $65 million USD for a minority stake of about 1.5% in FTX US in two funding rounds between October 2021 to January this year. The firm added that the total cost of its investment was only a negligible 0.09% of its net portfolio value of $293 billion USD.

The investment firm added that none of the disclosed investments involves cryptocurrency, despite rumors to the contrary, reninsta8ing that it has “no direct exposure in cryptocurrencies.” Temasek claims that before investing, it conducted “extensive due diligence” on FTX from Feb. to Oct. 2021, reviewing its audited financial statements and analyzing cyber security threats.

“Separately, we gathered qualitative feedback on the company and management team based on interviews with people familiar with the company, including employees, industry participants, and other investors,” Temasek stated.

Before deciding to invest, Temasek stated that it probed the associated regulatory risk with cryptocurrency financial market service providers and also sought advice from external legal as well as cybersecurity specialists, with a legal and regulatory review undertaken for the investments.

“We recognize that while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks,” Temasek said. “It is apparent from this investment that perhaps our belief in the actions, judgment, and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced.”

Following the collapse of FTX, Temasek stated that its thesis of investment in FTX was to invest in a leading digital asset exchange, providing them with protocol agnostic and market-neutral exposure to crypto markets with a fee income model and no trading/balance sheet risk.

Earlier this week, roughly 130 companies in FTX Group — including FTX Trading, FTX US, under West Realm Shires Services, and Alameda Research filed for Chapter 11 bankruptcy proceedings in the US.

Saniya Raahath
Saniya Raahath

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