Sequoia alleged its outlay in FTX has no negative bang on its fund

Sequoia Capital, a major venture capital firm, has written down the value of its investment in the troubled crypto currency exchange FTX to zero.

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

Sequoia Reduces FTX Investment to $0

In a note to limited partners (LPs) released on Thursday (November 10, 2022) via Sequoia’s Twitter handle, the venture capital firm stated that its $213.5 million investment in FTX and FTX.US – the exchange’s American-based unit – has been reduced to $0.

Sequoia invested $150 million in FTX and FTX.US through its Global Trust Fund III, noting that the investment represented only 3% of the fund’s total capital.

The venture capital firm assured LPs that the fund was in good financial shape, citing $7.5 billion in realized and unrealized gains.

The SCGE Fund also made a separate $63.5 million investment in both entities. However, the exposure was only 1% of its portfolio.

Sequoia also stated that it always conducts extensive due diligence before investing, and that it did the same for FTX.

The firm was among 60 investors who contributed $900 million to FTX’s Series B funding in July 2021, valuing 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 stated that the nature and extent of the risk are unknown at this time, the firm informed LPs that it would provide more information on the FTX situation, which is “developing quickly.”

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

To read our blog on “Cryptocurrencies decline as market jitters about the FTX exchange spread,” click here