Temasek to write down $377 million in FTX, says belief in Bankman-Fried appears to be ‘misplaced’

Temasek said the total cost of its investment in FTX was 0.09 per cent of its net portfolio value of S$403 billion. PHOTO: REUTERS

SINGAPORE - Temasek will write off its US$275 million (S$377 million) investment in cryptocurrency company FTX, “irrespective of the outcome of FTX’s bankruptcy protection filing”.

In a statement issued early on Thursday, the investment company said the total cost of its investment in FTX was 0.09 per cent of its net portfolio value of $403 billion as at end-March.

It invested US$210 million for a minority stake of about 1 per cent in FTX International, and pumped in another US$65 million for a minority stake of about 1.5 per cent in FTX US, which is the American subsidiary.

These investments were carried out across two funding rounds from October 2021 to January 2022.

The shocking collapse of Mr Sam Bankman-Fried’s FTX empire due to liquidity woes has shaken the crypto world and triggered a contagion that has spread to Genesis, the crypto broker, and Gemini, the crypto exchange. FTX has filed for protection from bankruptcy and Mr Bankman-Fried has stepped down as its chief executive.

“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,” said Temasek.

It added that there have been misperceptions that the investment in FTX is an investment in crypto. “To clarify, we currently have no direct exposure in cryptocurrencies.”

This comes after another FTX investor, Sequoia Capital, said that it would write down the full value of its US$214 million bet on the exchange. SoftBank was later said to be also anticipating a loss of around US$100 million on its investment.

Temasek said that just as it does with all investments, it “conducted an extensive due diligence process on FTX”, which took about eight months from February to October 2021.

During this period, it reviewed the company’s audited financial statement, which showed it to be profitable.

Due diligence efforts were focused on regulatory risks, particularly licensing and compliance, Temasek said, adding that “advice from external legal and cyber-security specialists in key jurisdictions was sought, with legal and regulatory review done for the investments”.

Interviews with people familiar with FTX, such as staff, industry players and other investors, were also conducted.

If allegations, now under investigation, that customer assets were mishandled and misused are true, then it would amount to serious misconduct or fraud at FTX, Temasek said.

It added: “As we only had about 1 per cent stake in FTX, we did not have a board seat. However, we take corporate governance seriously, engage the boards and management of our investee companies regularly and hold them accountable for the activities of their companies.”

FTX’s board comprised Mr Bankman-Fried, an FTX staff member and a lawyer. There was no investor on its board.

Temasek said it continues to recognise the potential of blockchain applications and decentralised technologies.

“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 said.

Read Temasek’s full statement on FTX.

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