$297 Billion Singapore Temasek Released Internal Review on $275 Million Investment in FTX, No Misconduct But Investment Team Will Have Their Compensation Reduced
29th May 2023 | Hong Kong
Singapore state-owned investment company Temasek with $297 billion portfolio has released the internal review on Temasek $275 million investment in FTX, finding no misconduct from the investment team but the investment team took collective accountability and will have their compensation reduced. Temasek on FTX (29/5/23): “With FTX, as alleged by prosecutors and as admitted by key executives at FTX and its affiliates, there was fraudulent conduct intentionally hidden from investors, including Temasek. Nevertheless, we are disappointed with the outcome of our investment, and the negative impact on our reputation. An independent team has conducted an internal review of the investment and the findings were directly presented to the Board Risk & Sustainability Committee and to our Board. Although there was no misconduct by the investment team in reaching their investment recommendation, the investment team and senior management, who are ultimately responsible for investment decisions made, took collective accountability and had their compensation reduced.” Temasek on investment strategy: “Temasek, as an investor-owner, seeks to deliver sustainable returns over the long term. While there are inherent risks whenever we invest, we believe that we have to invest in new sectors and emerging technologies to understand how these areas may impact the business and financial models of our existing portfolio, and whether they would be drivers of future value in an ever-changing world. This is why we invest into early stage companies.” In March 2023, 18 defendants including Sequoia Capital, Softbank & Singapore Temasek have received a class action lawsuit in United States (Miami, Florida) for allegedly conspiring with crypto exchange FTX, with the lawsuit claiming the defendants wielded power, influence & deep pockets to launch FTX house of cards into multi-billion scale. The lawsuit cited Singapore Temasek ($297 billion Singapore state-owned investment company): “We conducted an extensive due diligence process on FTX, which took approximately eight months from February to October 2021.” Read More: 18 Defendants Including Sequoia Capital, Softbank & Singapore Temasek Received Class Action Lawsuit in United States for Conspiring with Crypto Exchange FTX, Claims Defendants Wielded Power, Influence & Deep Pockets to Launch FTX House of Cards into Multi-Billion Scale
“ $297 Billion Singapore Temasek Released Internal Review on $275 Million Investment in FTX, No Misconduct But Investment Team Will Have Their Compensation Reduced “
$297 Billion Singapore Temasek Invested $275 Million in FTX Representing 0.09% of Portfolio, Write-down FTX to Zero Value & No Direct Exposure to Cryptocurrencies
17th November 2022 – Singapore state-owned investment company Temasek with $297 billion portfolio has released a statement, reporting a total investment of $275 million in the now bankrupt FTX (0.09% of Temasek Portfolio), a full write-down on FTX to zero value and reiterate Temasek has no direct exposure to cryptocurrencies. Temasek: “Similar to all investments, we conducted an extensive due diligence process on FTX, which took approximately 8 months from February to October 2021. During this time, we reviewed FTX’s audited financial statement, which showed it to be profitable … … In view of FTX’s financial position, we have decided to write down our full investment in FTX, irrespective of the outcome of FTX’s bankruptcy protection filing.” Temasek also highlighted the risk of early stage investment: “Our early stage investments constitute ~6% of our portfolio, and as a group have generated good returns for us, with IRRs in the mid- teens.” In the latest funding round, FTX has a $32 billion valuation and have leading investors & celebrities including SoftBank, Tiger Global, Sequoia Capital, Temasek, Ontario Teachers’ Pension Plan, Gisele Bündchen & Naomi Osaka.
On Sam Bankman-Fried – “Post investment, we continued to engage management on business strategy and monitor performance. We recognise that while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks. Reports have since surfaced that customer assets were mishandled and misused in FTX. If these statements are true, then this amounts to serious misconduct or fraud at FTX. All of this is currently being investigated by the regulators. 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.”
Temasek on FTX Investment
Temasek Statement:
[ Our Blockchain Strategy
Innovative technologies, including blockchain technology, are enablers with the potential to transform sectors and create a more connected world. The nascency of the blockchain and digital asset industry presents innumerable opportunities as well as significant risks.
As such, we closely track the risks involved and have taken a calibrated two-pronged approach for exposure in this space – venture building and investing.
- Our venture building efforts have been focused on programmable money, digital assets tokenisation, and decentralised identity and data. Several of these entities are not blockchain-based at this stage but rely on the technology and focus on delivering open data solutions and open networks.
- Our blockchain investment activity focuses on:
- Financial market service providers to the digital asset space providing protocol agnostic and market neutral exposure; and
- Technology infrastructure including protocols, wallets, developer tools, cross-chain messaging, metaverse and gaming infrastructure
Background on our investment in FTX
We believe that exchanges form a key part of global financial systems.
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.
We invested US$210 million for a minority stake of ~1% in FTX International, and invested US$65 million for a minority stake of ~1.5% in FTX US, across 2 funding rounds from October 2021 to January 2022. The cost of our investment in FTX was 0.09% of our net portfolio value of S$403 billion as of 31 March 2022.
There have been misperceptions that our investment in FTX is an investment into cryptocurrencies. To clarify, we currently have no direct exposure in cryptocurrencies.
Our risk-return framework and due diligence processes
Our investment discipline, centred around intrinsic value and our risk-return framework, guides our due diligence for new investments and ongoing engagement with our investee companies.
As an investor-owner seeking sustainable returns over the long term, we believe that we have to invest in new sectors and emerging, nascent business models to understand the applications and impact they may have on the business and financial models of our existing portfolio, or be drivers for future value in an ever-changing world. This is why we invest in early stage companies and accept the binary risks associated with such investments. Our early stage investments constitute ~6% of our portfolio, and as a group have generated good returns for us, with IRRs in the mid- teens. However, we do recognise the inherent risks of investing in early stage companies and take a very measured approach to such investments by applying an illiquidity risk premium on the cost of capital. In addition, we also add on a venture risk premium for the early stage they are in. Our blockchain direct investments are not a significant part of our early stage investments.
Similar to all investments, we conducted an extensive due diligence process on FTX, which took approximately 8 months from February to October 2021. During this time, we reviewed FTX’s audited financial statement, which showed it to be profitable. In addition, our due diligence efforts focused on the associated regulatory risk with crypto financial market service providers, particularly licensing and regulatory compliance (i.e. financial regulations, licensing, anti-money laundering (AML)/ Know Your Customer (KYC), sanctions) and cybersecurity. Advice from external legal and cybersecurity specialists in key jurisdictions was sought, with legal and regulatory review done for the investments.
Separately, we also gathered qualitative feedback on the company and management team based on interviews with people familiar with the company, including employees, industry participants, and other investors.
Post investment, we continued to engage management on business strategy and monitor performance.
We recognise that while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks.
Reports have since surfaced that customer assets were mishandled and misused in FTX. If these statements are true, then this amounts to serious misconduct or fraud at FTX. All of this is currently being investigated by the regulators.
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.
We expect companies that we invest in to comply with their obligations under the laws and regulations of jurisdictions in which they have investments or operations; abide by sound corporate governance; and above all act ethically always. As we only had a ~1% stake in FTX, we did not have a board seat. However, we take corporate governance seriously, engage the boards and management of our investee companies regularly and hold them accountable for the activities of their companies.
Going forward
We are supportive of the efforts of the regulators and the courts, and we encourage the principals involved with FTX to cooperate for an orderly resolution of outstanding matters.
We continue to recognise the potential of blockchain applications and decentralised technologies to transform sectors and create a more connected world. But recent events have demonstrated what we have identified previously – the nascency of the blockchain and crypto industry and the innumerable opportunities as well as significant risks involved.
In view of FTX’s financial position, we have decided to write down our full investment in FTX, irrespective of the outcome of FTX’s bankruptcy protection filing.
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.
We will continue to remain prudent and exercise caution even as we explore opportunities that are aligned with our structural trends, to deliver sustainable returns over the long term for our overall portfolio. ]
$32 Billion 5th Largest Crypto Exchange FTX Files for Bankruptcy & $500 Million Hacked After Bankruptcy, Investors Include SoftBank, Tiger Global, Sequoia Capital, Singapore Temasek, Ontario Teachers’ Pension Plan, Gisele Bündchen & Naomi Osaka
12th November 2022 – The 5th largest crypto exchange (FTX)with $626 billion trading volume in 2022, had filed for bankruptcy (10/11/22) and newly appointed CEO John Ray III released in a Twitter statement that FTX had been hacked (reports estimate $400 million to $600 million hacked) after bankruptcy. FTX depositors expected to lose billions in crypto deposits with the bankruptcy, and at the same time triggering law-enforcement investigations and potential criminal charges. With FTX digital currency (FTT) collapsing and with Binance & Founder Changpeng Zhao learning of Sam Bankman-Fried trading firm (Alameda Research) assets is mainly made up of FTT, Binance started liquidating FTT, that quickly triggered a global selloff. FTX Founder & Chairman Sam Bankman-Fried who had resigned at the bankruptcy, had tried to engineer a $8 billion to $9.4 billion bailout from investors including from Elon Musk and biggest competitor & top crypto exchange Binance & Founder Changpeng Zhao but failed. Binance: “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com … … In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help. Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.” US Treasury Secretary Janet Yellen: “It shows the weakness of this entire sector … … The notion that you could use the deposits of customers of an exchange and lend them to a separate enterprise that you control to do leveraged, risky investments – that wouldn’t be something that’s allowed.” FTX is a crypto exchange and pays depositors high interest rate to attract deposits. The top 5 largest crypto exchange before FTX banktrupcy are Binance, OKX, UpBit, Coinbase & FTX. See below for more info including Elon Musk, and investors in FTX.
Follow FTX announcement on Twitter https://mobile.twitter.com/ftx_official/with_replies
(FTX websites may have been hacked)
In FTX bankruptcy petition, FTX Trading has $10 billion to $50 billion in assets, $10 billion to $50 billion in liabilities, and more than 100,000 creditors. John J. Ray III, a restructuring expert, has been appointed to take over as CEO.
FTX Sam Bankman-Fried offers Elon Musk $3 billion to invest in Twitter
- Michael Grimes Morgan Stanley (Represents Sam): Offering “at least $3 billion” to buy Twitter, and talk about the potential for “social media blockchain integration” (blockchain version of Twitter).
- Elon Musk: Does Sam actually have $3B liquid?
- Michael Grimes Morgan Stanley: “He’s into you… I do believe you will like him. Ultra genius and doer builder like your formula. Built FTX from scratch after MIT physics.”
- Elon Musk: Blockchain twitter isn’t possible. Will meet with Sam so long as I don’t have to have a laborious blockchain debate.
After FTX Bankruptcy:
- Accurate. He set off my bs detector, which is why I did not think he had $3B.
- — Elon Musk (@elonmusk) November 12, 2022
FTX Investors – SoftBank, Tiger Global, Sequoia Capital, Temasek, Ontario Teachers’ Pension Plan, Gisele Bündchen & Naomi Osaka
FTX Investors – In the latest funding round, FTX has a $32 billion valuation and have leading investors & celebrities including SoftBank, Tiger Global, Sequoia Capital, Temasek, Ontario Teachers’ Pension Plan, Gisele Bündchen & Naomi Osaka.
FTX Founder & Chairman Sam Bankman-Fried, Age 30 with $16 Billion Fortune Prior to FTX Bankruptcy
FTX Founder & Chairman Sam Bankman-Fried (Age 30) founded the firm in 2019, and had a personal fortune of around $16 billion to $17 billion prior to the bankruptcy. Alameda Research was founded in 2017 as a quantitative trading firm and will also be winded down. Sam Bankman-Fried graduated from MIT (Massachusetts Institute of Technology) and his parents are professors at Stanford University.
2022 Top 5 Largest Crypto Exchange
The top 5 largest crypto exchange before FTX banktrupcy are Binance, OKX, UpBit, Coinbase & FTX.
2022 Volume YTD (9/11/22)
- Binance – $4.9 trillion
- OKX – $960 billion
- UpBit – $800 billion
- Coinbase – $775 billion
- FTX – $626 billion
- Source: CoinGecko
Sam Bankman-Fried Sees His $16 Billion Fortune Shrink
Breaking Down The FTX Collapse
Singapore Temasek Portfolio Value Reaches $297 Billion, 1 Year Shareholder Return of 5.07% & 16% Since 1974
14th July 2022 – Singapore state-owned investment company Temasek portfolio value has reached $297 billion (S$403 billion) at the end Q1 2022 (31/3/22), with total shareholder return of +5.07% in 1 year (20 Year: +10%, 10 Year: +9,83%, Since 1974: 16%, compounded returns in USD). Temasek also reported investing S$61 billion and divesting S$37 billion in the last 12 months, and new key sustainability initiatives launched to progress towards 2050 net zero ambition. Mr Lim Boon Heng, Chairman, Temasek Holdings: “Our world today is immensely complex. The challenges faced by governments, businesses and society have never been so multi-dimensional or far-reaching. While the future remains unpredictable, we recognise that there are tremendous opportunities for us to work together to overcome global challenges. Our Purpose, So Every Generation Prospers, guides us, even more so in such uncertain times, to continue building a bright future for current and future generations”. Dilhan Pillay, Executive Director and Chief Executive Officer of Temasek Holdings: “Temasek has been purpose-driven since its inception. Guided by our MERITT values and our roles set out in the Temasek Charter as an investor, institution and steward, we strive to do well, do right, and do good as we contribute to building a better and more inclusive world, so every generation prospers. In the decade ahead, volatile as it may be, we will keep our focus on constructing a resilient and forward looking portfolio. With sustainability at the core of all that we do, we will devote resources to nurture our people and prepare for a future-ready workforce. These efforts are underpinned by three key pillars: providing catalytic capital in the financial, human, social and natural environment areas; developing a networked organisation; and living by our strong sense of purpose, culture and values.” For Temasek Review 2022, please visit Temasek Review 2022
Singapore $297 Billion Temasek Leong Wai Leng Appointed as President of Singapore Market, Png Chin Yee as CFO, Tan Chong Lee to $3.3 Billion Investment Firm 65 Equity Partners as CEO
27th October 2022 – Singapore state-owned investment company Temasek with $297 billion (S$403 billion) portfolio value has announced senior leadership changes to carry Temasek through their 2030 journey, with Chief Financial Officer (CFO) Leong Wai Lengrelinquishing her role (after 16 years) and appointed as Temasek President of Singapore Market, Deputy CFO Png Chin Yee to become CFO, and Temasek International President Tan Chong Lee will be transferred to 65 Equity Partners as CEO. 65 Equity Partners is a $3.3 billion (S$4.5) investment firm setup in October 2021 to invest in companies with market value between $1 billion to $5 billion, targeting deal sizes between $100 million to $200 million. 65 Equity Partners provides capital solutions to large local enterprises, and catalyse their growth as they pursue their regional expansion and transformation strategies, investing across industries with strong structural tailwinds, such as consumer, industrial & business services, logistics, healthcare, and technology, underpinned by committed owners and management teams. It provides flexible capital solutions to address a wide range of situations including growth funding, M&A financing, shareholding re-organisations, balance sheet optimisations as well as privatisations and cornerstone investments. In Singapore, it also plans to work closely with other Singapore-focused funds such as Heliconia Capital Management, Tower Capital Asia and Novo Tellus Capital Partners. Pek Siok Lan, General Counsel, will be on sabbatical leave from January 2023 and will return to the firm in July 2023 to assume a new role. Read: Singapore Temasek Portfolio Value Reaches $297 Billion, 1 Year Shareholder Return of 5.07% & 16% Since 1974
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