Sequoia Capital Writes Down Entire Value of Its FTX Stake

(Bloomberg) — Sequoia Capital wrote down the complete worth of its holdings in FTX, a sign the enterprise capital agency sees no clear path to recouping its funding within the embattled cryptocurrency trade.

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The VC agency put in about $214 million final yr in FTX’s worldwide and US companies, Sequoia instructed its buyers Wednesday. The writedown contains holdings of each FTX.com and FTX.us, stated a spokeswoman for the agency.

“We’re within the enterprise of taking threat,” Sequoia wrote in a message to buyers. “Some investments will shock to the upside, and a few will shock to the draw back.”

Sequoia is amongst a number of distinguished backers that stand to lose huge on their holdings of Sam Bankman-Fried’s FTX. Others embody BlackRock Inc., Tiger International Administration and SoftBank Group Corp. That’s an enormous reversal of fortune for the startup funding powerhouse, which in September referred to as Bankman-Fried a “legend” and held up his “savior advanced” as value emulating. This week, Sequoia appended a line to that public article that clashed with its celebratory tone.

“Since this text was printed, a liquidity crunch has created solvency threat for FTX and its future is unsure,” the newest addition went. “FTX is exploring all alternatives to make sure its prospects are capable of recuperate their funds as shortly as potential.”

A smaller enterprise fund, Multicoin Capital, instructed buyers Wednesday that about 10% of its belongings below administration have been affected. “Sadly, we weren’t capable of withdraw the entire Fund’s belongings on FTX,” Multicoin wrote in a letter reviewed by Bloomberg.

A sudden lack of confidence in FTX.com amongst prospects uncovered deep issues with the cryptocurrency trade. Individuals rushed to withdraw cash and dump tokens related to the corporate, inflicting a liquidity crunch. A rival, Binance, agreed to purchase FTX.com after which pulled out over issues with FTX’s monetary well being.

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Bankman-Fried held a name with buyers Wednesday and stated FTX.com wanted a money infusion or must file for chapter, Bloomberg reported. The US entity, FTX.us, stood at a distance from the disaster, however the Sequoia writedown signifies a insecurity in that asset, too.

Sequoia sought to reassure buyers, saying FTX accounts for lower than 3% of dedicated capital within the fund with the most important publicity to FTX. That fund, Sequoia stated, has realized and unrealized good points of about $7.5 billion.

Right here’s the complete memo:

–With help from Hannah Miller.

(Updates with Sequoia’s earlier feedback from the fourth paragraph)

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