Temasek’s statement on FTX: writes down US$275M investment, belief in founder is “misplaced”

As crypto exchange FTX collapses, Temasek Holdings becomes one of its latest investors to write down its US$275 million funding.

FTX’s other backers such as SoftBank Group Corp’s Vision Fund and Sequoia Capital have also marked down their investment to zero after FTX, founded by Sam Bankman-Fried, filed for bankruptcy protection in the United States last week in the highest-profile crypto blowup to date.

“In view of FTX’s financial position, we have decided to write down our full investment in FTX, irrespective of the outcome of FTX’s bankruptcy protection filing,” said Temasek in a detailed statement on its website today (Nov 17).

Temasek said it had invested US$210 million for a minority stake of about one per cent in FTX International, and US$65 million for a minority stake of about 1.5 per cent in FTX US, across two funding rounds from October 2021 to January 2022.

“The cost of our investment in FTX was 0.09 per cent of our net portfolio value of S$403 billion (US$294.3 billion) as of 31 March 2022,” it said.

Temasek said its early-stage investments made up about six per cent of its total portfolio.

The thesis for its funding of FTX was to invest in a leading digital asset exchange that would provide it with “protocol agnostic and market neutral exposure to crypto markets with a fee income model and no trading or balance sheet risk”.

It added that there have been “misperceptions” that their investment in FTX is an investment into cryptocurrencies and further clarified that it has “no direct exposure in cryptocurrencies”.

Belief in Bankman-Fried is “misplaced”

According to Temasek, it had conducted an extensive due diligence process on FTX from February to October 2021, during which it had reviewed FTX’s audited financial statement, which showed it to be profitable.

However, reports have since surfaced that customer assets were mishandled and misused in FTX.

“If these statements are true, then this amounts to serious misconduct or fraud at FTX. All of this is currently being investigated by the regulators,” said Temasek.

“It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced,” it said.

In its statement, Temasek asserted that the write-down of its investment in FTX will not have significant impact on its overall performance and will treat any investment losses seriously, and learn from them.

“We will continue to remain prudent and exercise caution even as we explore opportunities that are aligned with our structural trends, to deliver sustainable returns over the long term for our overall portfolio,” it said.

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