After a liquidity crunch created solvency risk for FTX, Sequoia Capital is set to mark down its investment of over $210 million in the cryptocurrency exchange to $0. Investors have started to take drastic measures amid rising fears of Sam Bankman-Fried’s company going bankrupt.
Sequoia Capital said they are monitoring the situation as the full nature and extent of this risk are not known at this time. The venture capital firm has decided to mark its investment down to $0. In a brief note, Sequoia Capital said its exposure to FTX is limited. It acknowledged owning FTX .com and FTX US in one private fund. The firm highlighted that FTX is not a top 10 position in the Global Growth Fund III, as such, its $150 million cost basis accounts for less than 3% of the committed capital of the fund. Sequoia Capital outlined that they are in the business of taking risks.
The venture capital firm noted that some investors will be surprised by the upside, and some by the downside. However, Sequoia Capital doesn’t take it lightly and engages in extensive research and thorough diligence on every investment it takes. In regards to investment in FTX, the firm said it had run a rigorous diligence process.
Meanwhile, Bankman-Fried told investors that without a cash injection, FTX would need to file for bankruptcy.