Sequoia Capital wrote down all of a US$214mln investment in cryptocurrency exchange FTX, outlining it is “in the business of taking risks”.
With a liquidity crunch creating a solvency risk for FTX in recent days likely leading to bankruptcy, the US venture capital firm marked its investment in the international and US businesses down to US$0 in a bid to cut losses.
In a note to its limited partners, Sequoia highlighted that other investment firms will likely be hit by FTX’s woes, including the likes of BlackRock Inc (NYSE:BLK) and Tiger Global Management.
It was also quick to outline that its exposure to FTX was limited, with less than 3% of its Global Growth Fund III, and under 1% of its SCGE fund invested in FTX.com and FTX.us.
These losses, it explained, are offset by roughly US$7.5bn in gains from the growth fund.
Previously, the venture capital firm had been singing its praises of FTX founder, Sam Bankman-Fried, even dubbing him a “legend,” but its confidence seems to have finally faltered.
FTX has been in the midst of financial turmoil recently, with speculation of bankruptcy seeing millions of crypto assets withdrawn from the exchange, before reports of a takeover by main rival, Binance sent the entire cryptocurrency market spiralling.