SINGAPORE: Singapore state investor Temasek Holdings said it would write down the value of its entire investment of US$275 million (RM1.25 billion) in collapsed crypto currency exchange FTX, in the latest move by FTX’s investors.
“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,“” Temasek said in a detailed statement on Thursday (Nov 17).
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.
Temasek said it had invested US$210 million for a minority stake of about 1% in FTX International, and US$65 million for a minority stake of about 1.5% in FTX US, across two funding rounds from October 2021 to January 2022.
“The cost of our investment in FTX was 0.09% of our net portfolio value of S$403 billion (RM1.33 trillion) billion) as of 31 March 2022,” it said.
Temasek said its early stage investments made up about 6% of its total portfolio.
It said 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.
Temasek said it currently had no direct exposure in cryptocurrencies.
It said 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.
“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.
FTX filed for bankruptcy protection in the United States last Friday in the highest-profile crypto blowup to date, after traders pulled US$6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
In another development, major crypto player Genesis Global Capital suspended customer redemptions in its lending business on Wednesday (Nov 16), citing the sudden failure of FTX, while court papers showed Bankman-Fried faces legal action.
After a flurry of tweets and interviews by Bankman-Fried, FTX said he “has no ongoing role” at the company and does not speak on its behalf.
The implosion of FTX has rippled across the industry, hobbling liquidity at firms with exposure to what was once one of the world’s biggest crypto exchanges, and prompting investigations by regulators in several countries.
Lawmakers from the US Congress said on Wednesday they were planning hearings on FTX before yearend, while the New York Department of Financial Services said it is monitoring the situation at Genesis.
While not naming FTX directly, Treasury Secretary Janet Yellen said on Wednesday that more effective oversight is needed over the crypto markets to address risks previously identified that were “at the centre of the crypto market stresses observed over the past week”, and urged Congress to act quickly.
Venture capital firm Digital Currency Group, the ultimate parent of Genesis, as well as of crypto asset manager Grayscale, said on Twitter that Genesis’ decision to suspend redemptions “was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion”.
Genesis, which also offers crypto trading and custody services through an affiliate that are not affected, had US$2.8 billion in total active loans at the end of the third quarter, according to the company's website. Last year, it extended US$130.6 billion in crypto loans and traded US$116.5 billion in assets, it said.
The suspension at Genesis “has no impact on the business operations of DCG and our other wholly owned subsidiaries”, the company said.
Still, Grayscale Bitcoin Trust, the world’s largest bitcoin fund, plunged almost 7% on Wednesday, while the price of bitcoin fell 2.6% to US$16,400 and is down around 20% this month.
Crypto exchange Gemini, which was founded by the Winklevoss twins, said its yield-generating “Earn” programme, which uses Genesis as its lending partner, will not be able to meet customer redemptions.
Several other crypto firms, including Crypto.com and stablecoin Tether, said on Wednesday they had no exposure to Genesis.
Genesis is not alone in facing fallout from FTX's collapse.
Crypto lender BlockFi, which previously acknowledged it has significant exposure to FTX, plans to lay off workers while preparing to file for bankruptcy, The Wall Street Journal reported on Tuesday.
Within the industry, some executives considered possible further ripple effects.
“I do think there’s going to be another washout of crypto, but it’s going to be the less well-capitalised crypto players who got burned by not having diversification of their assets,” said Jeff Howard, head of institutional sales at Hong Kong-based digital exchange OSL.
“The crypto ecosystem is intertwined in a way that will drive further contagion in the near term. Crypto contagion risk remains on the rise,” added Joe Urban, managing director of electronic trading at prime brokerage firm Clear Street.
Meanwhile, US court filings showed Bankman-Fried is facing legal action in the United States from investors alleging the company’s yield-bearing crypto accounts violated Florida law.
The proposed class action filed late on Tuesday in Miami alleges that FTX yield-bearing accounts were unregistered securities that were unlawfully sold in the United States.
The lawsuit also seeks damages from several celebrities who helped promote FTX, including National Football League quarterback Tom Brady and tennis star Naomi Osaka.
Representatives for Bankman-Fried, Brady and Osaka did not immediately respond to requests for comment.
US and Bahamian authorities were discussing the possibility of bringing Bankman-Fried to the United States for questioning, Bloomberg reported on Tuesday.
But Clayton Fernander, the Commissioner of Police in the Bahamas, said on Wednesday on the sidelines of a police conclave in Nassau that police have not interviewed or met with Bankman-Fried and that Fernander has not been in communication with US authorities in relation to the matter.
FTX group’s liquidation is proving a subject of dispute, as the exchange’s Bahamas-based liquidators filed a Chapter 15 petition in a US bankruptcy court in New York late on Tuesday questioning the validity of the US bankruptcy proceedings.
The liquidators, appointed by a Bahamas judge on Nov 10, said that because their filing came before FTX’s bankruptcy filing in the United States, they were the only ones authorized to begin bankruptcy proceedings for FTX and its affiliates.
The US bankruptcy proceedings involve multiple FTX group companies with more than 100,000, and possibly over a million, creditors. – Reuters