Sequoia Capital marks down its FTX stake to $0

Lavina Daryanani
Source: Vox

FTX was in the midst of being acquired by the world’s largest exchange Binance until a day back. However, a recent report suggested that Binance was likely to step back from buying out the beleaguered company. Alongside, FTX’s founder, Sam Bankman-Fried, recently took down a series of tweets that assured that all the funds on the exchange were safe. Thus, investors have been steering away from FTX.

The Sequoia Capital team just announced that they were completely writing down the value of their holdings in FTX. In a letter to investors, Sequoia attributed FTX’s “liquidity crunch” and “solvency risk” as reasons for their action. The VC firm put in roughly $214 million last year in FTX’s international and US businesses. The firm stated,

In recent days, a liquidity crunch has created solvency risk for FTX. The full nature and extent of this risk is not known at this time. Based on our current understanding, we are marking our investment down to $0.”

Also Read: FTX founder takes down tweets as FTT continues to plummet

Sequoia ran a “rigorous diligence process” before investing in FTX

The VC firm revealed that its exposure to the crypto exchange company was “limited” and it was “not a top ten position in the fund.” Sequoia further clarified that FTX accounted for less than 3% of committed capital in the fund with the biggest exposure to the company. That fund, per Sequoia, has realized and unrealized gains of about $7.5 billion and “remains in good shape.”


Alongside, the SCGE Fund, L.P. diverted $63.5M in FTX.com and FTX US. The US entity, as such, is not essentially affected by the ongoing crisis, but Sequoia’s writedown brings to light its lack of confidence.

The firm further clarified that during the time of their investment in SBF’s company, they ran a “rigorous diligence process.” In 2021—the year of their investment—FTX generated around $1 billion in revenue and more than $250M in operating income.

The note to investors also assured that the company will continue carrying out “extensive research” and “thorough diligence” even in the future.

“We are in the business of taking risk. Some investments will surprise to the upside, and some will surprise to the downside. We do not take this responsibility lightly and do extensive research and thorough diligence on every investment we make.”