Sequoia company’s investment in FTX is “good as nothing
New York City: According to a report that was released not too long ago by the company, the value of Sequoia Capital’s stake in the cryptocurrency exchange FTX was recently slashed to zero. As of the previous week, this investment likely represented one of the highest potential gains that the venture capital business has ever had in its history of 50 years.
When Sequoia made their investment in the Series B round of the rapidly expanding business situated in the Bahamas in July 2021, FTX was estimated to be worth $18 billion, as was disclosed in the company’s letter. After a delay of two months, investors determined the worth of the firm to be $25 billion. In January of this year, FTX successfully completed a Series C investment round with a total funding amount of $400 million, increasing its total funding to $2 billion and its staggering value to $32 billion.
Reportedly, Sam Bankman-Fried, the founder and CEO of FTX, informed investors that he required emergency liquidity to make up a shortfall of up to $8 billion caused by withdrawal requests that had been made recently. This shortfall was caused by the fact that recent withdrawal requests had been made. It was rumored that Sam desired a hybrid arrangement consisting of a loan and shares.
Sequoia said that the new information about its investment in FTX did not come as a surprise to them. According to them, it is quite possible that other investors in FTX, such as BlackRock, Tiger Global, Insight Partners, and Paradigm, are alerting their limited partners of actions that are comparable to these. (The Ontario Teachers’ Pension Plan Board, which made a direct investment in FTX, has a far bigger shareholder base that may be anxious about their retirement savings even if their pensions are guaranteed). FTX is a publicly traded company.
Even more out of the norm was the decision made by Sequoia to tweet the letter tonight instead of delivering it directly to the company’s investors in the traditional manner. It is impossible to view the action as anything other than a clear indicator that Sequoia desires to maintain as much distance as possible between itself and FTX. As more information about FTX’s fast unspooling continues to surface, it is difficult to see the move as anything other than a clear indication.
Alameda Research, a trading business that is controlled by SBF, is said to have put an entire third of its assets in FTX’s FTT token, according to reports that surfaced the previous week. This not only highlighted how vulnerable the two firms were because of their strong ties to one another, but it also aroused worries about the possibility of market manipulation.
Binance promptly went for the kill after those “revelations” by tweeting about them and selling off its FTT holdings, which stirred up enough suspicion to lead other FTT investors to hurry to sell their FTT tokens. As a result of this, additional FTT investors rushed to sell their FTT tokens. The internet had a field day with the situation when Binance announced that it has signed a letter of intent to acquire the firm (presumably at a fire sale price). A weaker FTX had already collapsed at Binance’s doorstep by yesterday.
On the other hand, it seems like the story is still in the process of development. Binance made the announcement that it will be leaving FTX after doing more study on the matter. One of their statements claimed the following:
“The issues are beyond our control or ability to assist,” and “in the outset, our purpose was to be able to service FTX’s customers to supply liquidity,” respectively. “The challenges are beyond our control or capacity to help.”
In spite of this, there is a possibility that a glimmer of hope has surfaced in the form of a prospective cooperation with FTX. Justin Sun made this implication in a tweet earlier today, in which he said that the team was trying to find a solution to the problem.