(Bloomberg) — Sequoia Capital wrote down the full value of its holdings in FTX, a signal that the venture capital firm sees no clear path to recouping its investment in the struggling cryptocurrency exchange.
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The venture capital firm invested about $214 million last year in FTX’s international and U.S. businesses, Sequoia told its investors on Wednesday. The delisting includes shares of both FTX.com and FTX.us, a company spokesman said.
“We are in the business of taking risk,” Sequoia wrote in a note to investors. “Some investments will surprise on the upside and some will surprise on the downside.”
Sequoia is among several prominent backers who could lose large sums from their holdings in Sam Bankman-Fried’s FTX. Others include BlackRock Inc., Tiger Global Management and SoftBank Group Corp.
A smaller venture capital fund, Multicoin Capital, told investors on Wednesday that about 10% of its assets under management were affected. “Unfortunately, we were unable to withdraw all of the fund’s assets from FTX,” Multicoin wrote in a letter seen by Bloomberg.
A sudden loss of trust in FTX.com among customers revealed deep problems with the cryptocurrency exchange. People rushed to cash out and sell off tokens associated with the company, causing a liquidity crisis. A rival, Binance, agreed to buy FTX.com and then pulled out over concerns about FTX’s financial health.
Bankman-Fried held a call with investors on Wednesday and said FTX.com needed a cash infusion or would have to file for bankruptcy, Bloomberg reported. The US entity, FTX.us, stood aloof from the crisis, but the delisting of Sequoia also shows a lack of confidence in that asset.
Sequoia tried to reassure investors by saying that FTX represented less than 3% of committed capital in the fund with the largest exposure to FTX. That fund, Sequoia said, has realized and unrealized gains of about $7.5 billion.
Here’s the full note:
–With help from Hannah Miller.
(Updates with additional reporting beginning in the second paragraph.)
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