The collapse of the FTX crypto exchange, which occurred almost eight months ago, has resulted in ongoing drama. Recently, some of the largest VC firms have been implicated in the fallout. A class-action lawsuit filed in the United States District Court for the Northern District of California has named 18 VC firms as defendants, accusing them of aiding and abetting FTX's alleged fraud.
🌎《Now you can now start trading at TNNS PROX》📈
🔥Start trading today, click "sign up" from the link above.
VC Firms Sued Over FTX Drama. Inadvertently Helping FTX To Steal Customer’s Funds
FTX, a former major cryptocurrency exchange, faced a spectacular collapse that had significant impacts on the industry. The company's management was accused of mismanaging and transferring up to $10 billion in customer funds to Alameda, which used FTX's native token, FTT, as collateral. As a result, venture capital firms that had invested in the now-defunct exchange are now being sued for allegedly aiding and abetting FTX's fraud. The lawsuit claims that Temasek, Sequoia Capital, Sino Global, Softbank, and 14 other VC firms failed to conduct proper due diligence before investing hundreds of millions of investor funds into the company. The lawsuit alleges that these VC firms "perpetrated, conspired to perpetrate, and/or aided and abetted the FTX Group's multi-billion-dollar frauds for their own financial and professional gain." VC Firms Sued Over FTX Drama.
Lack Of Due Diligence By The Venture Capital Firms
Several VC firms invested in FTX during the crypto industry's bull run, disregarding obvious red flags and showing eagerness and FOMO. Temasek, a Singapore state fund, admitted to a lack of due diligence and cut the compensation pay of the staff responsible for its investment in FTX. Despite claiming to have investigated FTX's finances, audits, and regulatory checks over eight months, Temasek invested $210m and another $65m in the exchange in two funding rounds, both of which it had to write off. Softbank, a Japanese VC firm, marked down its $100 million investment in the exchange, and Sino Global Capital filed a lawsuit against FTX for $67 million. FTX clarified in a recent tweet that bankruptcy proceedings are related to its stake in the SGC fund, and its estate is currently selling its limited partner stakes in SGC at auction to raise money.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Comments