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Here is a pile of bitcoins after software engineer Mike Caldwell minted them at his store in Sandy, Utah.
George Frey | Getty Images
Venture capital firm Sequoia Capital has announced that it will zero out more than $210 million in investments in cryptocurrency exchange FTX due to possible bankruptcy.
Recently, the liquidity crisis has created solvency risks for FTX, Sequoia said. Note to investors posted on Twitter.
“Based on our current understanding, we are reducing our investment to $0,” the Silicon Valley-based company said Wednesday.
“At this time, we do not know the full nature and extent of this risk,” Sequoia said, adding that it was monitoring the rapidly evolving situation.
Owned by 30-year-old entrepreneur Sam Bankman-Fried, FTX was valued at $32 billion earlier this year.
Sequoia’s announcement came as Changpeng Zhao, CEO of rival exchange Binance. withdrawn the proposed deal Buying FTX exposes the distressed company to the risk of a liquidity crisis.
Also on Wednesday, the U.S. Department of Justice and Securities and Exchange Commission reportedly launched an investigation into the sudden implosion of a crypto trading platform.
FTX native token FTT fell nearly 30% and traded at $2.21 on Thursday. The broader cryptocurrency market is taking a hit Similarly, Bitcoin reached its year-end low earlier this week.
Sequoia emphasized that it has limited exposure to FTX and has invested $150 million in FTX.com and FTX.us through its Global Growth Fund III.
“FTX is not a top 10 position in the fund,” the company said, adding that it represents less than 3% of the fund’s total capital.
The fund remains in good shape, the memo said, on how losses from exposure to FTX will be offset by larger capital flows of realized and unrealized gains in the same fund. I explained in detail.
“We are in the business of taking risks,” Sequoia said in a note. “Some investments will rise unexpectedly and some will fall unexpectedly.”
Separately, Minneapolis Fed President Neil Kashkari continued his sharp criticism of cryptocurrencies on Wednesday.
“It’s like the wild west and chaos all rolled into one,” he said of virtual assets. event at South Dakota State University,
He added that the asset’s “fatal flaw” is that it is “difficult to distinguish” because anyone can create those coins.
It could be 99% noise, hype and chaos based on whats going on right now, he said, without commenting further on the implosion of FTX and its ripple effects on other currencies.
