Temasek’s FTX investment scrutinized in Singapore parliament

Temasek is reviewing its internal processes following the write-off of its US$275 million investment in crypto exchange FTX, Singapore’s deputy prime minister, Lawrence Wong, said in parliament on Wednesday.

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An internal unit at Temasek will conduct the review separately from the team that decided to invest in FTX and will report directly to the board. This is a step up from the company’s usual review process for all its investments.

“Temasek feels that this is a significant project, and there is something to be learned from the experience,” said Wong. He noted that such reviews have been triggered by Temasek before by other investments that were written off or permanently impaired.

The government won’t rule out calling for an external private auditor or engaging the auditor general if it suspects negligence, fraud, or misconduct.

“It’s not a matter of an investment loss. But it would be something that we feel has gone wrong within the organization possibly,” Wong said.

Reputational damage for Temasek

Temasek’s decision to invest in FTX has been a hot-button topic since news emerged that the cryptocurrency exchange – once lauded as a safe bet in the crypto space – was mismanaging customer funds and possibly engaged in fraud. FTX is currently being investigated in the Bahamas and in the US for criminal misconduct.

Besides Temasek, a private company owned by Singapore’s Ministry of Finance has two other investment entities that collectively contribute to the national reserves. These are the Government of Singapore Investment Corporation, which is a sovereign wealth fund, and the Monetary Authority of Singapore, the country’s central bank that manages its foreign reserves.

Wong maintained that no amount of due diligence and monitoring can eliminate risk, as it is an inherent part of any investment, particularly early-stage deals in emerging technologies.

He added that FTX not only caused financial loss to Temasek but also reputational damage.

“I am confident that the Temasek board and management team will learn and improve from this experience. At the same time, we should see this FTX loss in the broader context of Temasek’s performance in early-stage investments,” he said.

According to Wong, the government does not micromanage the aforementioned investment entities and does not decide on their investments or prescribe asset classes or assets. However, it sets out risk parameters for them and holds them accountable for good long-term performance by appointing board members and senior management.

He added that the government tracks the portfolios of these entities and subjects these organizations to rigorous stress tests to account for outlier events – such as a crisis or fallout in cryptocurrencies.

“The FTX loss is disappointing and is being taken seriously. But the occurrence of investment losses does not in itself imply that the governance system is not working. Rather, this is the nature of investment and risk-taking,” Wong said.

“Very limited” spillover from FTX collapse