Venture capital firm Sequoia Capital apologized to its investors for its decision to invest in FTX.com and FTX US at a special meeting last Tuesday, reported Bloomberg citing an anonymous source.
“Alfred Lin, Shaun Maguire and Roelof Botha were keynote speakers at the virtual meeting,” the source said.
Roelof Botha, one of the CEOs who chaired the conference call, expressed regret that their $214 million investment in FTX.com and FTX.US was a loss.
Alfred Lin, a corporate partner who led the investment business with FTX, provided an update on the situation.
Meanwhile Shaun Maguire, the other partner he focused on cryptogiving an overview of the sector rocked by the scandal.
The Wall Street Journal Also citing the source, Sequoia partners said the firm will improve its due diligence process on future investments.
“The company will be in a position to have its early-stage startup financial statements audited by one of the big four accounting firms,” the source said.
The Big Four accountancy firms are the world’s largest professional services network and include Deloitte, Ernst & Young (EY), Peat Marwick Goerdeler (KPMG) and PricewaterhouseCoopers (PwC).
Partners assure investors that exposure to FTX is limited
After FTX crashed, the price of Bitcoin also fell, which was previously in the range of 20,000 to 16,500 USD, and used to be 15 thousand USD. This figure is the lowest since 2020.
Based on Coinmarketcap data, large companies using FTX must prove their liquidity capabilities.
Previously reported, Sequoia Capital said it would reduce its investment by more than US$210 million or about IDR 3.2 trillion in exchange cryptocurrency FTX, because the possibility of bankruptcy threatens.
“In recent days, the liquidity crunch has created solvency risks for FTX,” Sequoia said in a note to investors posted on Twitter. CNBCFriday (11/11/2022).
Sequoia Capital continued that currently the firm has reduced its investment in FTX to $0, meaning that currently the venture capital firm has no exposure to FTX at all.
“The full nature and extent of this risk is unknown at this time,” Sequoia said, adding that they are monitoring the situation as it rapidly develops.
Sequoia highlighted its very limited exposure to FTX, with a record loss of $150 million on its FTX investment offset by approximately $7.5 billion in realized and unrealized gains in Global Growth Fund III.
“FTX is not among the top ten positions in the fund,” the firm concluded, adding that it makes up less than 3 percent of the fund’s total capital.
Another SCGE fund, Sequoia, invested US$63.5 million in FTX. The company said those investments represented less than 1 percent of the SCGE fund’s portfolio as of Sept. 30.
The partners said staff reviewed the financial statements and asked many times about the relationship between FTX and Alameda surveya trading company also founded by Sam Bankman-Fried that allegedly borrows and loses money from FTX clients.
“Last May, Sequoia was assured that FTX funds were not being used to finance Alameda’s activities and that FTX and Alameda were separate entities,” said one person familiar with the call.
Citing the report, the partners said they believed it wouldis misled’.
What is Sequoia Capital?
The company Sequoia Capital, a well-known financier as well as one of the first investors of Google and Apple. Citing the Alpha JWC Ventures site, Sequoia is one of the top venture capital firms in the world to invest in starting level growth and the level above it.
In 2018, they launched Surge for startups early stage with a focus on India and Southeast Asia.
Data from Vantage Capital Partners shows that Sequoia Capital financed 11 starting Southeast Asia in 2019, making it the fourth most active entrepreneurial company in Southeast Asia.
The meeting was an exceptional event for the 50-year-old company, according to an informed source.
“Sequoia rarely discusses the broader investor group outside of regular update calls and in-person conferences,” the source said.
On Wednesday (February 11, 2022), an article from Coindesk “caused” a crisis in the crypto industry. Media editors claim that the financial statements of Alameda, a crypto hedge firm owned by Sam Bankman-Fried, hold the FTT with billions of dollars in collateral for the company’s debts.
This crisis came to a head when Changpeng Zhao decided to sell FTT for USD 500 million due to FTX’s recent financial liquidity crisis.
Negative effects penetrate in all directions. FTT prices immediately fell and FTX users began withdrawing their funds in huge amounts beyond the limits of the system’s capabilities.[ab]