[News] Singapore’s Temasek to write down US$275m investment in FTX

Temasek Holdings will write down its full investment of US$275 million in FTX. — Reuters pic

Thursday, 17 Nov 2022 9:36 AM MYT

SINGAPORE, Nov 17 — Temasek Holdings will write down its full investment of US$275 million (RM1.25 billion) in FTX, acknowledging that its belief in the cryptocurrency exchange’s former CEO Sam Bankman-Fried “would appear to have been misplaced”.

“In view of FTX’s financial position, we have decided to write down our full investment in FTX, irrespective of the outcome of FTX’s bankruptcy protection filing,” the state investment firm said in a statement on its website on Thursday (Nov 17).

The move comes after FTX filed for bankruptcy last week in a high-profile blowup, leading to a further tumbling in crypto assets such as bitcoin and ethereum, which had already taken a battering earlier in the year.

Temasek said it had invested US$210 million for a minority stake of about 1 per cent in FTX International, and US$65 million for a minority stake of about 1.5 per cent in FTX US, across two funding rounds from October 2021 to January 2022.

It added that the cost of the investment in FTX was 0.09 per cent of its net portfolio value of S$403 billion (RM1.34 trillion) as of March 31.

Temasek said that its “thesis” for its investment in FTX was to “invest in a leading digital asset exchange providing us with protocol agnostic and market neutral exposure to crypto markets with a fee income model and no trading or balance sheet risk”.

It added that there have been “misperceptions that our investment in FTX is an investment into cryptocurrencies”.

“To clarify, we currently have no direct exposure in cryptocurrencies,” it said.

Temasek said that it had conducted an “extensive due diligence process on FTX, which took approximately eight months from February to October 2021”.

“During this time, we reviewed FTX’s audited financial statement, which showed it to be profitable.”

The firm said it recognised that “while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks”.

It added: “Reports have since surfaced that customer assets were mishandled and misused in FTX. If these statements are true, then this amounts to serious misconduct or fraud at FTX. All of this is currently being investigated by the regulators.”

“It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced,” the firm said of FTX’s founder.

Analysts previously told TODAY that FTX’s fall should be seen as an isolated incident, not as a systemic failure of the industry, and should not deter institutional firms from investing in such outfits.

Instead, FTX’s shocking demise should underline how important it is for investors to study the risks they take when they park their money in a lightly regulated industry, they added.

In its statement, Temasek added that it continues to recognise the “potential of blockchain applications and decentralised technologies to transform sectors and create a more connected world”.

“But recent events have demonstrated what we have identified previously – the nascency of the blockchain and crypto industry and the innumerable opportunities as well as significant risks involved”.

It added that while its write-down of its investment in FTX “will not have significant impact on our overall performance, we treat any investment losses seriously and there will be learnings for us from this”.

“We will continue to remain prudent and exercise caution even as we explore opportunities that are aligned with our structural trends, to deliver sustainable returns over the long term for our overall portfolio,” it said. — TODAY

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