One of the key investors into collapsed cryptocurrency exchange FTX says it conducted eight months of due diligence which raised no red flags.
Singapore’s state-owned investment firm Temasek has now written off its investment of $275 million into the now-bankrupt company.
It spent $210m for a stake of 1% in FTX International and $65m for a 1.5% stake in FTX US across two funding rounds.
Temasek said the due diligence was carried out from February to October 2021. “During this time, we reviewed FTX’s audited financial statement, which showed it to be profitable,” it stated.
“In addition, our due diligence efforts focused on the associated regulatory risk with crypto financial market service providers, particularly licensing and regulatory compliance (i.e. financial regulations, licensing, anti-money laundering (AML)/ Know Your Customer (KYC), sanctions) and cybersecurity.
“Advice from external legal and cybersecurity specialists in key jurisdictions was sought, with legal and regulatory review done for the investments.
“Separately, we also 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.
“Post investment, we continued to engage management on business strategy and monitor performance.
“We recognise that while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks.”
It added: “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.
“We continue to recognise the potential of blockchain applications and decentralised technologies to transform sectors and create a more connected world. But recent events have demonstrated what we have identified previously – the nascency of the blockchain and crypto industry and the innumerable opportunities as well as significant risks involved.”
Temasek said that FTX represented only 0.09% of its portfolio value of more than $293 billion.
“While this write down of our investment in FTX will not have significant impact on our overall performance, we treat any investment losses seriously, and there will be learnings for us from this,” it stated.
“There have been misperceptions that our investment in FTX is an investment into cryptocurrencies. To clarify, we currently have no direct exposure in cryptocurrencies.”
Vox pop
Disgraced FTX CEO Sam Bankman-Fried has revealed how he really feels about developments at the exchange.
In an hour-long private Twitter exchange with Vox reporter Kelsey Piper – which she claims was on the record – Bankman-Fried made statements clearly at odds with his public courting of regulators while in charge of FTX.
The figure, currently under investigation by the Securities and Exchange Commission and the Department of Justice, wrote “f*** regulators… they make everything worse… they don’t protect customers at all”.
Admitting that trading arm Alameda Research, reportedly loaned $10bn by FTX, had gambled with FTX depositors’ money, he also said he regrets filing for bankruptcy, which was when he stepped down.
He also revealed that a lot of what he said in the public arena was pure PR: “man, all the dumb s*** I said… [talking about ethics] is what reputations are made of… I feel bad for those who get f***** by it… by this dumb game we woke westerners play where we say all the right shiboleths and so everyone likes us.”
Cryptocurrency shorts
The lending unit of cryptocurrency broker Genesis has suspended redemptions and new loan originations in the wake of FTX’s collapse. It serves an institutional client base and had $2.8 billion in total active loans.
The Australian Securities Exchange (ASX) has shelved its plan to use blockchain for clearing and settlements after five years of development. An independent review from technology consulting firm Accenture identified “significant challenges with the solution design and its ability to meet ASX’s requirements”. Originally scheduled to launch in 2020, it was intended to replace the 25-year-old Clearing House Electronic Subregister System (CHESS).
Matter Labs has raised $200 million for its ZkSync blockchain scaling solution intended to accelerate the onboarding process of mainstream businesses onto Web3. The Series C round was co-led by Dragonfly and Blockchain Capital with participation from a16z, Lightspeed Capital and Variant.
Crypto prices
The overall market cap of the 21,700 coins is at $828 billion at the time of writing (7am UK), a 2.3% decrease in the last 24 hours.
For round-ups of recent cryptocurrency news developments, click here.
For valuations of the top 100 coins by market cap in US dollars, plus 24-hour price change, see below.