The liquidity disaster within the cryptocurrency buying and selling platform FTX.com continues to escalate within the crypto market. On November 10, Sequoia Capital shared a notice on FTX despatched to World Progress Fund III on Twitter.
“Based mostly on our present understanding, we’re marking our funding right down to $0,” the Silicon Valley-based agency stated Wednesday.
The assertion reads the liquidity crunch created solvency dangers for FTX. The complete nature and extent of this threat are usually not but recognized.
Sequoia stated the corporate remains to be attempting to reassure buyers that it has restricted publicity to FTX.
Sequoia Capital emphasised that even among the many fund with the most important publicity to FTX named GGFIII, which has investments in FTX.com and FTX.US, just isn’t within the fund’s prime ten positions, and the $150 million value foundation solely accounts for the fund has lower than 3% of dedicated capital. Losses of $150 million have been offset by realized and unrealized features of $7.5 billion, so the fund held up properly.
The SCGE Fund invested a complete of $63.5 million in FTX.com and FTX.US, representing lower than 1% of the SCGE Fund’s September 30, 2022 portfolio at honest worth.
Sequoia advised buyers that it spent about $213.5 million on FTX’s worldwide and U.S. operations final 12 months.
“We’re in a risk-taking enterprise,” Sequoia Capital stated. “Some investments will shock you, and a few will disappoint.”
As well as, it acknowledged that when selecting to spend money on FTX, it carried out strict due diligence on it. In 2021, when it invested, FTX generated about $1 billion in income and greater than $250 million in working revenue.
Nevertheless, the speedy change within the cryptocurrency market was sudden for the corporate, however thankfully, FTX just isn’t the fund’s prime ten holdings.
The corporate stated it’ll talk with buyers in a well timed method if there’s any additional information.
The explanation why Sequoia Capital straight selected to write down down can partly clarify that the corporate has misplaced confidence in FTX and believes that there is no such thing as a different clear method to get well its funding in FTX.
Different corporations, together with BlackRock, Tiger World, SoftBank Group, and the Ontario Academics’ Pension Fund, which ranks among the many prime 5 pension funds in Canada, are all on the record of FTX’s prospects and may additionally endure losses this time.
In response to Bloomberg, FTX might face a funding hole of as much as $8 billion, and with no money injection, the corporate might want to file for chapter.
Binance has introduced on Twitter that it’ll “not pursue the potential acquisition of FTX”, amongst different causes, because of FTX’s mishandling of buyer funds.
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