Sequoia Capital Writes Down Its Investment in FTX to Zero

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Last Updated on November 11, 2022 by Bitfinsider

The venture capital firm Sequoia Capital announced that it will write down to zero its roughly $210 million investment in the cryptocurrency exchange FTX, as the possibility of bankruptcy looms.

“In recent days, a liquidity shortage has posed a solvency risk for FTX,” Sequoia warned in a tweet to investors.

“Based on our present knowledge, we are writing down our investment to $0,” the Silicon Valley company announced on Wednesday.

“The exact nature and scope of this risk are unknown at this time,” Sequoia stated, adding that they are closely watching the rapidly unfolding scenario.

Earlier this year, FTX, owned by 30-year-old entrepreneur Sam Bankman-Fried, was valued at $32 billion.

Sequoia’s news follows Binance’s CEO Changpeng Zhao’s withdrawal from a deal to acquire FTX, putting the struggling company at risk of a liquidity crisis.

Also on Wednesday, the U.S. Department of Justice and the Securities and Exchange Commission allegedly began investigating the sudden collapse of the cryptocurrency trading site.

On Thursday, the value of FTX’s native token, FTT, fell roughly 30% to $2.21. The broader cryptocurrency market has also suffered, with bitcoin hitting a fresh yearly low earlier this week.

Sequoia emphasized that its exposure to FTX was minimal and that the Global Growth Fund III had invested $150 million in FTX.com and FTX.us.

“FTX is not one of the top 10 positions in the fund,” the company stated, adding that it represents less than 3% of the fund’s total capital.

The memo focused on how the fund’s losses due to its exposure to FTX are offset by a higher capital inflow consisting of “realized and unrealized gains in the same fund.”

Sequoia stated in its message, “We are in the business of taking risks” Some investments will surprise positively, while others will surprise negatively.


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