Major venture capital firm Sequoia Capital has written down the value of its investment in the beleaguered crypto exchange FTX, to zero.
Notably, the company was part of the investors who participated in FTX’s $900 million funding round in July 2021, which brought the exchange’s valuation to $18 billion at the time.
In a note to limited partners (LPs), which was revealed via Sequoia’s Twitter handle on Thursday November 10, 2022 the venture capital firm said that its investment in FTX and FTX.US – the American-based unit of the exchange – totaling $213.5 million, is marked down to $0.
Sequoia invested $150 million in FTX and FTX.US via its Global Trust Fund III, noting that the investment accounted for only 3% of the total capital in the fund. The venture capital firm reassured LPs that the fund was in good financial condition as it has realized and unrealized gains of $7.5 billion.
There was also a separate investment of $63.5 million in both entities through the SCGE Fund. But the exposure was 1% of its portfolio.
Sequoia further said it always conducted a thorough diligence process before investing and did the same for FTX. The company was part of 60 investors who raised $900 million in FTX’s Series B funding in July 2021, which valued 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 said the nature and extent of the risk are currently unknown, the firm told LPs that it would provide more information on the FTX situation, which the company is “developing quickly.”
Meanwhile, it remains to be seen what action other FTX backers, like Softbank, and Pantera Capital Temasek, will take.