Singapore’s Temasek has revealed in that it did not find any major red flags in the now-disgraced FTX cryptocurrency exchange.
The state-owned investment firm said in the recent post it had invested $275 million in the exchange and had conducted due diligence over an eight-month period last year.
Investments included a $210 million or 1 percent stake in FTX International, along with a $65 million, 1.5 percent stake in FTX’s US wing, it stated.
Temasek added it checked FTX’s financial statements and investigated regulatory risks with market service providers in the crypto industry. It also received consultations from specialists in law and cybersecurity.
The company also interviewed people familiar with the exchange such as investors, employees, and others.
Due Diligence or Do Diligence?
Speaking on its due diligence process from February to October, it said: “The thesis for our investment in FTX was to invest in a leading digital asset exchange providing us with protocol agnostic and market neutral exposure to crypto markets with a fee income model and no trading or balance sheet risk.”
It added that it recognised that due diligence can “mitigate certain risks” but could not “eliminate all risks.”
Explaining further, Temasek added,
“It is apparent from this investment that perhaps our belief in the actions, judgment, and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced.”
The investment company assured it had “no direct exposure in cryptocurrencies,” adding its FTX investments were just 0.09 percent of its portfolio valued at $293 billion.
It concluded in its post,
“We continue to recognize the potential of blockchain applications and decentralized technologies to transform sectors and create a more connected world.”
Recent events showed that the “nascency of the blockchain and crypto industry” posed significant risks, it continued.
The Crypto Industry: Moving Forward
Concluding Temasek stated it supported efforts from regulators and courts and called for an “orderly resolution to outstanding matters.”
“There are inherent risks whenever we invest, divest, or hold our assets, and wherever we operate. While this write down of our investment in FTX will not have significant impact on our overall performance, we treat any investment losses seriously and there will be learnings for us from this,” it said.
The news comes after FTX’s collapse rocked the crypto industry, namely after former chief executive Sam Bankman-Fried saw a massive liquidity crunch trigger a bank run on his platform’s native token, FTT.
FTX and rival exchange Binance entered talks to bail out the embattled crypto exchange, but plans fell through due to what Binance CEO Changpeng Zhao (CZ) found were major due diligence concerns with the Bahamas-based company.
