The "Lehman Crisis" of cryptocurrencies continues to ferment, dragging traditional investment institutions into the quagmire.
On November 10, Sequoia Capital (Sequoia Capital ) issued a statement to LP (note: limited partner, i.e. investor) on social media Twitter . Because it was unable to determine the severity of the liquidity crisis of cryptocurrency exchange FTX, Sequoia Capital reduced its US$213.5 million investment in cryptocurrency exchange FTX to 0.
The Paper noticed that Sequoia Capital is only one of the affected institutions. FTX has been widely sought after by capital in the past year, and has completed three rounds of financing for within 7 months. However, in these three rounds of financing, at least hundreds of institutions participated in the investment (no repeated follow-up investment was considered).
At present, in addition to Sequoia Capital, Multicoin Capital, Canadian Ontario Teachers' Pension Fund and other investors have successively issued relevant statements to investors.
Sequoia Capital stated that its impact is limited
According to Sequoia Capital, its two funds have invested in FTX.com and FTX US in total. Among them, Global Growth Fund III invested US$150 million in FTX.com and FTX US, and SCGE Fund, L.P. invested US$63.5 million in FTX.com and FTX US.
public information shows that FTX is the world's leading cryptocurrency exchange. FTX founder Sam Bankman-Fried (SBF) also founded the hedge fund Alameda. Recently, media CoinDesk broke the news that Alameda will be in bankruptcy and most of the assets on the balance sheet are FTT tokens issued by FTX. This news instantly triggered market panic, and FTT was sold on a large scale, causing FTX to fall into a liquidity crisis.
On November 9, Binance, the world's largest cryptocurrency exchange, originally planned to acquire FTX, but only after due diligence, it publicly stated on November 10: "FTX's problems exceed our control and helping capabilities." At this point, the embattled FTX has entered the "Lehman moment" of a complete collapse.
Faced with the collapse of FTX, Sequoia Capital said about the investment failure event: "Some investments exceeded expectations, and some investments were disappointing, but in fact, we conducted due diligence for each investment. When investing in 2021, FTX generated a total revenue of US$1 billion and an operating income of US$250 million."
However, Sequoia Capital comforted LP that as of September 30, these two investments accounted for only 3% of Global Growth Fund III and 1% of SCGE Fund, L.P. Global Growth Fund III has achieved and unrealized revenues of approximately $7.5 billion.
Hundreds of VCs around the world collectively "stepped on the mine" "
FTX has a long list. In addition to Sequoia Capital, it also includes investors such as Temasek , BlackRock, Tiger Global, SoftBank Group , and Ontario Teachers' Pension Fund in Canada. Without exception, they will be hit to varying degrees.
Among them, as an important participant in global investment, the Canadian Ontario Teachers' Pension Fund, which has a more cautious style, seems to be participating in cryptocurrency investment for the first time.
On November 10th local time, the Ontario Teachers' Pension Fund of Canada issued a statement that it invested US$75 million and US$20 million in FTX.com and FTX US in October 2021 and January 2022, respectively, and stated that "although there is uncertainty about the future of FTX, any financial losses of this investment have limited impact on the plan, as the investment accounts for less than 0.05% of our total net assets."
cryptocurrency media THE BLOCK said that Multicoin Capital, which focuses on cryptocurrency investment, sent a letter to investors that FTX has crashed and 10% of the company's managed assets will be affected.
According to statistics from The Paper, in the past three years, different investment institutions have provided FTX with more than 2 billion US dollars in funds. Under the crazy pursuit of capital, FTX's valuation has frequently jumped in the short term.
Public information shows that in July 2021, when Sequoia Capital invested, the valuation of FTX was raised by US$18 billion; in October 2021, when Canadian Ontario Teachers' Pension Fund, Temasek Holdings, Blackstone Capital, and Tiger Global Fund additional investment, the valuation of FTX once again increased to US$25 billion; on January 31, 2022, after SoftBank Group, Tiger Global Fund and other institutions injected capital again, the valuation of FTX soared to US$32 billion.
Pengpai News compiled FTX financing based on public information, and made a map: Pengpai News reporter Qi Yeyun
In more than half a year, the valuation of FTX from US$18 billion to US$32 billion is the influx of a large number of venture capital institutions . FTX's B and B1 rounds of financing alone have followed the investment. In other words, if investment institutions do not consider repeated follow-up investment, at least hundreds of investment institutions will be affected.
cryptocurrency circle trust collapsed
November 11, even though Bloomberg quoted an insider as saying: "Because the balance sheet is personal privacy, Sequoia Capital cannot obtain Alameda's balance sheet in the pre-investment review of FTX.com and FTX.us. The situation of other investors is roughly similar."
But the group of celebrity investment institutions "stepped on the mine", which made investor Shaan Puri sigh on social media that there is no so-called "smart money" in the world at all. Those venture capital institutions have invested huge amounts of funds frantically in cryptocurrency companies, and even these companies have serious flaws.
Sequoia Capital partner Alfred Lin even commented during FTX's Series B financing: "FTX is the high-quality global cryptocurrency exchange needed by the world, and has the potential to become a leading financial exchange for all kinds of assets. Sam is the perfect founder of building this business, and the team has extraordinary execution."
It is worth noting that before the FTX crash, the market was not without warning.
Since the beginning of this year, cryptocurrency companies Voyager Digital, Celsius Network and Terraform Labs have gone bankrupt, and cryptocurrency hedge fund Sanjian Capital went bankrupt, which has sounded the alarm for the FTX's crushing defeat.
cryptocurrency market has been controversial. Behind the capital market fanaticism, there are many people calling for "risk".
Mark Mobius, the father of emerging market investment, once tried to extinguish the public's enthusiasm for cryptocurrencies: "Cryptocurrency is a religion, not an investment." However, for fanatics, this is just a story of "the wolf is coming", and ignores the fact that behind every shout, the real "wolf" is hidden in it.
"1. Never use the tokens you created as collateral; 2. Don't borrow money to do currency business, don't blindly pursue the effective use of capital, but keep a large amount of reserves." Finally, Binance founder Zhao Changpeng recorded two major lessons from the FTX incident on his Twitter.
