Nov 9, 2022 - Economy

Sequoia Capital says it did proper due diligence on FTX

FTX logo

Photo illustration by Jakub Porzycki/NurPhoto via Getty Images.

Venture capital firm Sequoia Capital on Wednesday sent a letter to investors about its investment in FTX, the global crypto exchange that suddenly collapsed after being valued at over $30 billion.

Why it matters: Sequoia is arguably the most successful venture capital firm ever, having made early investments in such companies as Apple, Google and Airbnb. This episode is a rare black eye, leaving both the firm and its limited partners scrambling for information.

What they're saying: Sequoia's message was threefold.

  1. Its $150 million of exposure to both FTX and FTX.US in its third global growth fund represents less than 3% of that fund's total capital commitment. Sequoia also has another $63.5 million investment via a crossover fund called SCGE. In both cases, it's marked the value down to zero.
  2. Sequoia conducted adequate due diligence at the time of investment, in a profitable company that had around $1 billion or revenue and $270 million of operating income.
  3. The firm continues to seek more information on what went wrong.

Of note: Axios has learned that Sequoia and other members of an FTX advisory board held a call today with FTX CEO Sam Bankman-Fried, but that they still don't have access to detailed balance sheet data.

  • Most FTX investors with whom Axios has spoken expect to write the value of their shares down to zero.

Earlier: Rival crypto exchange Binance walked away from a tentative agreement to buy FTX, saying that the company's "issues are beyond our control or ability to help."

Go deeper