The second-largest cryptocurrency corporation in the world, FTX Ltd., was regarded as a reliable, secure investment. However, the price of Bitcoin and Ether fell by more than 20% over a week due to its impending collapse, spreading alarmingly quickly throughout the cryptocurrency industry.
The FTX meltdown is terrible news for many investors and its founder Sam Bankman-Fried, who most certainly lost billions of dollars. However, due to his connections with American congressmen, Mr. Bankman-Fried was able to woo celebrities and knowledgeable institutional investment managers to support his exchange.
Beyond investors, FTX amassed a strong network of allies and promoters, many of whom received compensation in the form of business shares. However, many sponsorships and collaborations are in limbo as a result of the collasping cryptocurrency firm. In addition, U.S. cryptocurrency investors are suing Mr. Bankman-Fried and other celebrities. They pushed FTX because they used dishonest sales tactics to sell their accounts, causing them $11 billion in losses.
Here is a list of some investors that FTX recruited.
Ontario Teachers’ Pension Plan
The third-largest pension fund in Canada, the Ontario Teachers’ Pension Plan, invested a total of US$95 million in FTX. However, teachers say less than 0.05% of FTX’s total net assets are invested in FTX.
“These investments were made through our Teachers’ Venture Growth (TVG) platform, alongside a number of global investors,” a statement said. “Naturally, not all investments in this early-stage asset class meet expectations.”
On its website, however, the TVG group describes the fund differently, stating that it “invests directly in innovative, late-stage firms that are harnessing technology to design a better future.”
This incident represents a giant Canadian pension plan’s second misstep in cryptocurrency. The US$150 million Caisse de dépôt et placement du Québec investment in cryptocurrency platform Celsius Network Ltd., which sought bankruptcy protection in July, was entirely written off in August.
“Shark Tank” investor Kevin O’Leary was an FTX investor and spokesperson. However, in an interview with CNBC, the Canadian businessman said his investment in FTX has gone to “zero” and called for more regulation in the crypto space.
“There won’t be another situation like this for institutional investors,” he said. “We’re simply not going to put capital to work until this stuff gets regulated.”
As an investor, you will never get it right every time. You will make some mistakes. Sometimes big ones like FTX. The key is to learn from them so you don't repeat. Over time experience will get you to a place where you make more good investments than bad. #Crypto bottom is in! pic.twitter.com/AsOKZMTBOS
— Kevin O'Leary aka Mr. Wonderful (@kevinolearytv) November 12, 2022
The value of Sequoia Capital’s investment in the cryptocurrency exchange FTX was recently reduced to zero. Although this investment made up a relatively small portion of Sequoia’s total capital, as of last week, it probably represented one of the most significant unrealized gains* in the venture firm’s 50-year history.
Those supporters are undoubtedly still reflecting on this week’s events as a group. They are used to startup failures, but this is a true tragedy.
FTX was valued at $18 billion when Sequoia made an investment in the Series B round of the high-flying Bahamas-based company in July 2021. Investors placed the company’s value at $25 billion two months later. FTX raised $400 million in a Series C round in January of this year, bringing its total funding to $2 billion and its astounding valuation to $32 billion.
Now, FTX didn’t merely lose its high valuation after a string of errors — that’s the best-case scenario. Sam Bankman-Fried, the founder and CEO of FTX, reportedly told investors today that he needed emergency liquidity to make up a shortfall of up to $8 billion caused by withdrawal requests that had been made recently, according to the WSJ. He reportedly wanted a combination of loan and equity.
Even more out of the ordinary was Sequoia’s choice to tweet the letter tonight instead of mailing it to its investors directly. As information about FTX’s abrupt unspooling continues to emerge, it is difficult to read the move as anything other than a clear indication that Sequoia wants to keep as much distance as possible between itself and FTX.
Temasek on FTX Collapse
Regardless of the outcome of the cryptocurrency exchange’s filing for bankruptcy protection, Singapore’s Temasek Holdings will write down its $275 million investment in FTX.
“There have been misperceptions that our investment in FTX is an investment into cryptocurrencies. To clarify, we currently have no direct exposure to cryptocurrencies,” the firm said in a statement.
Temasek claimed that the failure of its investment in FTX was due to a bad bet on Bankman-Fried rather than a criticism of cryptocurrencies or blockchain technology.
“It is apparent from this investment that 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,” Temasek said. “While this write-down of our investment in FTX will not significantly impact our overall performance, we treat any investment losses seriously, and there will be learnings for us from this.”
Matt Huang, a co-founder of Paradigm, used Twitter to describe how the failure of the bitcoin exchange FTX has affected his business. Investment company Paradigm, with offices in San Francisco, supports crypto and Web3 firms and technologies.
“We are shocked by the revelations about FTX, Alameda, and SBF,” he began. FTX and trading firm Alameda Research filed for Chapter 11 bankruptcy last week. Both companies were founded by Sam Bankman-Fried (SBF), who has stepped down as the CEO of FTX.
“Facts are still coming to light, and there will be many lessons to learn,” Huang added.
“The coming weeks and months will be a tough time for crypto, but we remain optimistic about crypto’s potential and are committed to building towards the positive future we know it can enable,” he concluded.
Larry David invested in FTX
One of the 11 athletes and other celebrities mentioned in the class action complaint is the comedian Larry David.
In an ad for FTX that ran during the 2022 Super Bowl, the “Seinfeld” and “Curb Your Enthusiasm” actors played imaginary characters who dismissed significant innovations throughout history and concluded with the warning, “Don’t Miss Out on Crypto.”
The first significant female athlete to join FTX as an ambassador was tennis prodigy Naomi Osaka in March 2022. As part of the agreement, she obtained an equity stake in the business and promised payment in cryptocurrency.
Baseball player Shohei Ohtani of the Los Angeles Angels became an ambassador for FTX in November 2021. The deal’s compensation was to be paid in FTX shares and cryptocurrencies.