One of the key investors into collapsed cryptocurrency exchange FTX says it conducted eight months of due diligence which raised no red flags.
Singapore’s state-owned investment firm Temasek has now written off its investment of $275 million into the now-bankrupt company.
It spent $210m for a stake of 1% in FTX International and $65m for a 1.5% stake in FTX US across two funding rounds.
Temasek said the due diligence was carried out from February to October 2021. “During this time, we reviewed FTX’s audited financial statement, which showed it to be profitable,” it stated.
“In addition, our due diligence efforts focused on the associated regulatory risk with crypto financial market service providers, particularly licensing and regulatory compliance (i.e. financial regulations, licensing, anti-money laundering (AML)/ Know Your Customer (KYC), sanctions) and cybersecurity.
“Advice from external legal and cybersecurity specialists in key jurisdictions was sought, with legal and regulatory review done for the investments.
“Separately, we also gathered qualitative feedback on the company and management team based on interviews with people familiar with the company, including employees, industry participants, and other investors.
“Post investment, we continued to engage management on business strategy and monitor performance.
“We recognise that while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks.
It added: “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.
“We continue 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.”
Temasek said that FTX represented only 0.09% of its portfolio value of more than $293 billion.
“While this write down of our 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,” it stated.
“There have been misperceptions that our investment in FTX is an investment into cryptocurrencies. To clarify, we currently have no direct exposure in cryptocurrencies.”