Sequoia Says Investment in FTX Does Not Negatively Impact its Fund

Major venture capital firm Sequoia Capital has written down the value of its investment in the beleaguered crypto exchange FTX, to zero.

Notably, the company was part of the investors who participated in FTX’s $900 million funding round in July 2021, which brought the exchange’s valuation to $18 billion at the time.

Sequoia Marks Down FTX Investment to $0

In a note to limited partners (LPs), which was revealed via Sequoia’s Twitter handle on Thursday (November 10, 2022), the venture capital firm stated that its investment in FTX and FTX.US – the American-based unit of the exchange – totaling $213.5 million, is marked down to $0.

Here is the note we sent to our LPs in GGFIII regarding FTX. pic.twitter.com/Cgp1Yxk1pz

— Sequoia Capital (@sequoia) November 10, 2022

Sequoia invested $150 million in FTX and FTX.US via its Global Trust Fund III, noting that the investment accounted for only 3% of the total capital in the fund. The venture capital firm reassured LPs that the fund was in good financial condition as it has realized and unrealized gains of $7.5 billion.

There was also a separate investment of $63.5 million in both entities through the SCGE Fund. But the exposure was 1% of its portfolio.

Sequoia further said it always conducted a thorough diligence process before investing and did the same for FTX. The company was part of 60 investors who raised $900 million in FTX’s Series B funding in July 2021, which valued the exchange at an estimated $18 billion.

“At the time of our investment in FTX, we ran a rigorous diligence process. In 2021, the year of our investment, FTX generated approximately $1B in revenue and more than $250 million in operating income.”

While Sequoia said the nature and extent of the risk are currently unknown, the firm told LPs that it would provide more information on the FTX situation, which the company is “developing quickly.”

Meanwhile, it remains to be seen what action other FTX backers, like Softbank, and Pantera Capital Temasek, will take.

Responses Continue to Trail FTX Collapse

U.S. Senator Elizabeth Warren weighed in on the FTX saga, stating that the exchange’s collapse was an indication that the industry was all “smokes and mirrors.” Sen. Warren, one of the fiercest crypto critics on Capitol Hill, said she would continue to push for aggressive enforcement for the SEC to “enforce the law to protect consumers and financial stability.”

Former Kraken CEO Jesse Powell, in a long tweet thread, slammed FTX CEO Sam Bankman-Fried for his recklessness and sociopathic behavior. Powell also said:

“The damage here is huge. An exchange implosion of this magnitude is a gift to bitcoin  haters all over the world. It’s the excuse they were waiting for to justify whatever attack they’ve been keeping in their back pocket. We’re going to be working to undo this for years.”

The ex-Kraken chief also blamed U.S. regulators and lawmakers for not providing an enabling environment and suitable regulatory policies for crypto companies to operate.