Sequoia Capital, a leading venture capital firm, stated in a letter to its limited partners that the value of all its investments in FTX has been reduced to zero.
The letter, sent today by the Sequoia Capital team and shared on Twitter, detailed the firm’s exposure to FTX across two funds. The venerable venture capital firm suffered a total loss of $213.5 million.
Sequoia Capital stated on Twitter in a note to investors: “In recent days, a liquidity crunch has created solvency risk for FTX.”
At this time, the full nature and scope of this risk are unknown. Based on our current knowledge, we have reduced our investment to $0.
Furthermore, Sequoia stated that SCGE Fund, LP invested 1% of its $63.5 million portfolio as of 9/30/2022 in FTX.com and FTX US.
The venture capital firm went on to say that, while it is in the “business of taking risks,” it did “extensive research” before making the investment.
Sequoia also stated that FTX generated $1 billion in revenue and over $250 million in operating income in August 2022, which was announced publicly, while emphasizing that its exposure to FTX was limited.
In early 2022, Sam Bankman-FTX, Fried’s which was valued at $32 billion, was discovered to be unusually involved with Bankman-trading Fried’s firm Alameda Research.
While Binance, the world’s leading crypto exchange, initially agreed to buy FTX, the deal quickly fell through due to corporate due diligence, mishandled customers, and alleged US agency investigations.