Sequoia marks FTX investment to $0 after liquidity crunch

In an email sent to its limited partners, Sequoia Capital shared that it has marked its investment in crypto exchange FTX down to US$0.

Photo credit: Sequoia

Sequoia said that at the time of its investment in the crypto firm, it “ran a rigorous diligence process.” When the VC firm invested in FTX, the exchange generated around US$1 billion in revenue and over US$250 million in operating income.

The VC firm assured investors that its exposure to FTX is limited – Sequoia has FTX.com and FTX US in its private fund, Global Growth Fund III. “FTX is not a top 10 position in the fund, and our US$150 million cost basis accounts for less than 3% of the committed capital of the fund,” Sequoia wrote in the email.

The company added that the US$150 million loss from its FTX investment is offset by around US$7.5 billion in realized and unrealized gains in Global Growth Fund III, saying that “the fund remains in good shape.”

Another Sequoia fund – the offshore SCGE Fund – invested US$63.5 million in FTX. The VC firm said that this investment represents less than 1% of SCGE Fund’s portfolio as of September 30.

FTX has been facing several problems within the past few days after sister company Alameda Research’s balance sheet showed an alarming amount of FTT (FTX’s native token) in it.

Following this, Binance founder Changpeng Zhao – who was also an early investor in FTX – publicly announced his plans to sell off his FTT, which drove down the value of the token.

Shortly after, it was announced that Binance would acquire FTX. This deal was short-lived, however, as Binance shared on Twitter that it had backtracked on its plans after due diligence efforts.

FTX was one of the largest crypto exchanges in the world, having been valued at US$32 billion in February.

See also: Why the FTX collapse is a big deal