Venture capital firm Sequoia apologizes for funding investors for $150 million loss on FTX

0
Source: Adobe Stock / piter2121

In a rare move, an American venture capital firm Capital Sequoia Reportedly Apologized to Fund Investors for the $150 Million He Lost on the Now Bankrupt Crypto Exchange FTX.

The Wall Street Journal reported the apology, citing people familiar with the matter. Sequoia’s partners told investors in the fund on a call Tuesday that the company would improve its due diligence process with respect to future investments.

A Sequoia partner, according to the sources, said that in the future,

“The firm will be able to have even the financial statements of early stage startups audited by one of the big four accounting firms.”

The Big Four are the largest professional services networks in the world and include Deloitte, Ernest and Young (EY), Peat Marwick Goerdeler (KPMG)and PricewaterhouseCoopers (PwC).

Sequoia canceled its entire investment in FTX earlier this month after the exchange struggled to meet withdrawal requests. FTX filed for bankruptcy on November 11.

This investment was “one of the largest written by a venture capitalist in the business,” the report said. This happened after the company “avoided traditional corporate controls such as external board oversight that are typical for such large investments.”

Sequoia’s partners claimed on the call that the company had done due diligence on FTX. However,

“[It] also believed he was misled by FTX based on his recent bankruptcy filing, the people said.

Specifically, the company argued that it was misled by FTX founder Sam Bankman-Fried about the exchange’s ties to its parent company. Alameda Search.

It has since been revealed by Bankman-Fried that FTX loaned client funds to Alameda, which then lost billions of dollars, leaving FTX with a funding shortfall of up to $8 billion.

Boards of directors are generally responsible for approving transactions with related parties – which, in this case, is Alameda. However, according to the sources, Sequoia and other shareholders applied for a seat on the FTX board, but Bankman-Fried repeatedly told them that their stake in the company was too small for it.

Tuesday’s conference call was an unusual event for that company, people familiar with the matter said, because Sequoia rarely speaks to its broader group of investors outside of routine update calls and in-person conferences.

The Wall Street Journal cited their sources and reported that,

“FTX’s rapid decline has amplified a rare moment of resentment from investors in Sequoia’s funds over some of its recent moves.”

In a note to fund investors sent Nov. 9, Sequoia said the fund that backed FTX had $7.5 billion in real and paper earnings, as well as that the FTX investment was less than 3% of committed capital for the bottom.

Meanwhile, attorney representing new FTX management, James Bromley, told a bankruptcy hearing on Tuesday that a “substantial amount” of the exchange’s assets were missing or stolen.

Bromley said that,

“What we have here is a global, international organization, but one that was run as a personal fiefdom of Sam Bankman-Fried.”

He also previously stated that FTX was controlled by “inexperienced and unsophisticated individuals” and that “some or all of them were compromised”.

____

Learn more:
– Coinbase CEO Reveals Company Holds Over $39 Billion in BTC in Response to Binance CEO’s Now-Deleted Tweet
– Billionaire Tron founder Justin Sun seeks to buy FTX assets

– Latest FTX – Crypto Prices Level Out But FTX Only Has $1.24 Billion in Cash, Bahamas and SBF Link, Genesis on Brink, FTX Japan Withdrawals
– New revelation: US prosecutors were looking into FTX long before the exchange collapsed

Share.

About Author

Comments are closed.