On Thursday (17 Nov), state investor Temasek announced their decision to write down their full investment in the cryptocurrency exchange FTX. This is irrespective of the outcome of FTX’s bankruptcy protection filing.
In their statement, Temasek revealed that they had invested a total of S$377 million (US$275 million) in FTX.
But it’s now apparent that their belief in the actions, judgement and leadership of Sam Bankman-Fried, FTX’s CEO was ‘misplaced’.
This announcement comes a week after FTX collapsed, shocking the cryptocurrency industry.
In a statement on Thursday (17 Nov), Temasek shared that they had invested S$288 million (US$210 million) in FTX International, for a 1% minority stake in the company.
They had also invested S$89 million (US$65 million) for a minority stake of about 1.5% in FTX US.
This was done across two funding rounds from Oct 2021 to Jan 2022.
In total, Temasek’s investments in FTX added up to S$377 million (US$275 million). This equates to 0.09% of their S$403 billion net portfolio value as of 31 Mar 2022.
According to them, innovative technologies including blockchain technology has the potential to transform sectors and create a more connected world.
Blockchain as well as the digital asset industry present innumerable opportunities while carrying significant risks.
Therefore, to gain exposure in this space, Temasek assessed their risks before venturing into building and investing.
In particular, their blockchain investment activity focuses on financial market service providers to the digital asset space as well as technology infrastructure like wallets and protocols.
While there have been misperceptions that Temasek’s investment in FTX is into cryptocurrencies, they clarified that they don’t have the direct exposure.
Regulators are currently investigating FTX after reports of the mishandling and misuse of customer assets surfaced. If found to be true, this amounts to serious misconduct or fraud at FTX.
Speaking on the matter, Temasek said,
It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried…would appear to have been misplaced.
Sam Bankman-Fried is the founder and CEO of FTX.
Temasek said they expect companies they invest in to comply with obligations under the laws and regulations of jurisdictions they reside in.
These companies should also abide by sound corporate governance and always act ethically.
While their small investment in FTX did not grant Temasek a board seat, they stressed that they take corporate governance seriously.
They regularly engage boards and management of their investee companies to hold them accountable.
Temasek said that they are supportive of the regulators and courts’ efforts in investigating FTX.
The investor also encouraged principals involved with FTX to cooperate so that there can be an orderly resolution to outstanding matters.
Despite the turn of events, Temasek continues to recognise the value of blockchain apps and decentralised technologies.
They explain that their investment discipline is centered around intrinsic value and their risk-return framework.
This guides their due diligence for new and ongoing investments.
Temasek shares that while their processes mitigate certain risks, it is not possible to eliminate all risks.
With regards to FTX, in view of their current financial position, Temasek has decided to write down their full investment.
This is irrespective of the outcome of FTX’s bankruptcy protection filing.
While this write down will not significantly impact Temasek’s overall performance, they stressed that they treat such losses seriously.
Temasek assured that they will continue to remain prudent and exercise caution as they explore opportunities to deliver sustainable long-term returns for their overall portfolio.
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Featured image adapted from The Fifth Person and Vox.
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