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Sequoia Capital Writes Off $213.5 Million Investment in FTX

Sequoia Capital has written off its $213.5 million investment in FTX, joining other firms like Galaxy Digital in confirming exposure to the troubled exchange. The venture capital firm assured investors that its Global Growth Fund III has limited exposure, and the decision has sparked mixed reactions on social media.
Published on 2022-11-10

Sequoia Capital's Decision to Write Off FTX Investment

Sequoia Capital, a prominent venture capital firm, has announced the complete loss of its $213.5 million investment in FTX and FTX.US. This decision was communicated to investors through a letter and shared on Twitter, marking a significant step in addressing the financial turmoil surrounding the cryptocurrency exchange.

Implications for Sequoia's Global Growth Fund III

Sequoia emphasized that its exposure to FTX is limited within its Global Growth Fund III, reassuring investors that the loss will not significantly impact the fund's overall performance. This move reflects the firm's proactive approach to managing risks amidst the unfolding crisis.

Mixed Reactions on Social Media

The announcement has garnered mixed reactions on Twitter. While some users, like Samir Arora, criticized Sequoia for abandoning FTX during its crisis, others, such as Peter Lasinger, commended the firm's transparency and communication. Another user, MOASS, likened Sequoia's actions to gambling with clients' funds, drawing parallels to its previous investments.

Broader Impact on the Crypto Market

The collapse of FTX has sent shockwaves through the cryptocurrency industry. Following the leak of Alameda Research's balance sheet, which revealed heavy reliance on FTT tokens, Binance began liquidating its FTT holdings, causing a 75% drop in FTT's value. This has led to a liquidity crunch for FTX, with reports suggesting an $8 billion shortfall and potential bankruptcy.

Clarifications from Other Crypto Firms

In response to the crisis, several major crypto firms, including Coinbase, Tether, and Circle, have publicly denied any exposure to FTX. This transparency aims to reassure investors and mitigate potential contagion effects within the industry.

A Glimmer of Hope for FTX

Amid the chaos, Justin Sun, founder of the Tron network, has emerged as a potential savior for FTX. Sun announced that he and his team are working on a solution with FTX, leading to a brief 4,000% surge in the value of TRX, the native token of the Tron network.

Conclusion

The situation surrounding FTX continues to evolve, with significant implications for the broader cryptocurrency market. Sequoia Capital's decision to write off its investment highlights the severity of the crisis, while reactions from the crypto community reflect the complexity of the challenges at hand. As the situation unfolds, transparency and decisive action will be crucial for navigating this turbulent period.

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