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Major VC Firm Sequoia Capital Marks FTX Investment to $0 — Says ‘Liquidity Crunch Has Created Solvency Risk for FTX’

News Feed - 2022-11-11 06:11:37

Major VC Firm Sequoia Capital Marks FTX Investment to $0 — Says "Liquidity Crunch Has Created Solvency Risk for FTX"


Venture capital giant Sequoia Capital is marking its investment in the embattled crypto exchange FTX down to $0. “In recent days, a liquidity crunch has created solvency risk for FTX,” the firm stressed, adding that “The full nature and extent of this risk is not known at this time.” Sequoia Capital Deems Its Investment in FTX Worthless


Sequoia Capital sent a letter to its partners Wednesday informing them about its investment in cryptocurrency exchange FTX. The venture capital firm wrote: In recent days, a liquidity crunch has created solvency risk for FTX. The full nature and extent of this risk is not known at this time. Based on our current understanding, we are marking our investment down to $0.


The VC firm invested over $210 million in FTX.com and FTX US. However, the firm noted that its exposure to FTX is limited.


“We own FTX.com and FTX US in one private fund, Global Growth Fund III … our $150 million cost basis accounts for less than 3% of the committed capital of the fund,” the firm explained. In addition, the Sequoia Capital Global Equities fund invested $63.5 million in FTX.com and FTX US, representing less than 1% of the fund’s portfolio at fair value as of Sept. 30.


Noting, it is “in the business of taking risk,” Sequoia Capital stressed: At the time of our investment in FTX, we ran a rigorous diligence process.


The venture capital firm noted that when it invested in FTX last year, the crypto company generated approximately $1 billion in revenue and more than $250 million in operating income.


Sequoia Capital participated in a $420 million Series B funding round of FTX, which increased the crypto firm’s valuation to $25 billion. A total of 69 investors participated, including the Ontario Teachers’ Pension Plan Board, Temasek, Sea Capital, Tiger Capital, Rabbit Capital, Lightspeed Venture Partners, and funds and accounts managed by Blackrock.


Facing a liquidity crunch, FTX asked other major crypto exchanges for help. Binance CEO Changpeng Zhao (CZ) originally said his company intended to acquire FTX and provide liquidity. However, Binance said Wednesday that it decided not to proceed with the acquisition. “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of http://FTX.com.” Tags in this story ftx, Sequoia Capital, Sequoia Capital Sam Bankman-Fried, vc FTX, vc investment FTX


What do you think about VC firm Sequoia Capital considering its investment in FTX worthless? Let us know in the comments section below. Kevin Helms


A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography. Binance CEO Explains Situation With FTX — Says "We Did Not Master Plan This" EXCHANGES | 1 day ago Crypto Market Rout Fuels Global Exchange Volumes — Kraken, Coinbase Report Connectivity and Latency Delays EXCHANGES | 2 days ago


Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleBitcoin Price Outlook for November — FTX Crisis Fuels Bearish Momentum Next articleSEC, DOJ Investigate FTX — Regulators Suspect Crypto Exchange Mishandles Customer Funds Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItCentral Bank of Brazil Confirms It Will Run a Pilot Test for Its CBDC This Year


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