VC Firm Sequoia Capital Reportedly Apologizes for Investing in FTX
It seems that on Tuesday (22 November 2022) Silicon Valley venture capital firm Sequoia Capital had a conference call with investors in its fund(s) that had exposure to FTX.com and FTX US.
On 8 November 2022, Samuel Bankman-Fried (aka “SBF”), Co-Founder and (now) former CEO of crypto exchange FTX.com, and CZ, Co-Founder and CEO of Binance.com, announced that FTX and Binance had come to a provisional agreement:
On 9 November 2022, Binance announced why it was not able to go ahead with the plan to fully acquire FTX.com, pointing out that although it was hoping to “support FTX’s customers to provide liquidity”, the issues it discovered — as part of its due diligence process and via the various news reports about FTX — were “beyond” its “control or ability to help”:
On 10 November 2022, Sequoia sent the following note to the LPs in its Global Growth Fund III (GGFIII), in wihich it said that it said it was marketing its investment in FTX down to $0. Two of Sequoia’s funds had exposure to FTX: private fund Global Growth Fund III had invested $150 million in FTX.com and FTX US; and public/private crossover fund Sequoia Capital Global Equities (SCGE) had invested $63.5 million in FTX.com and FTX US.
On 11 November 2022, FTX.com issued the following press release:
And here is how — on the same day — SBF announced the collapse of the FTX empire:
The following video from Wall Street Journal nicely summarizes how FTX went bankrupt:
Well, on Tuesday (22 November 2022), Wall Street Journal (WSJ) reported that — according to people familiar with the matter — “Sequoia Capital apologized to its fund investors for the $150 million it lost on crypto exchange FTX.”
The WSJ report went on to say:
“On the call, Sequoia‘s partners told the fund investors that the firm would improve its due-diligence process on future investments and that it believed it was misled by FTX based on its recent bankruptcy filing, the people said…
“Sequoia invested the bulk of its cash in a Series B funding round for FTX in July 2021, when investor fervor for cryptocurrency startups hit an all-time high, people familiar with the matter said…
“When Sequoia and other shareholders asked for a seat on the company’s board of directors, Mr. Bankman-Fried repeatedly pushed back, telling them their ownership in the company was too small to warrant it, people familiar with the matter said. Boards typically have to approve transactions with so-called related parties like Alameda...
“Sequoia’s conference call Tuesday was an extraordinary event for the 50-year-old firm, according to the people familiar with the matter. Sequoia rarely addresses its broader group of investors outside of routine update calls and in-person conferences, the people said.“
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