Sequoia Capital Loses $150M in FTX Collapse

Venture capital (VC) firm Sequoia Capital has apologized to its investors for its loss in the fallen cryptocurrency exchange FTX and said it will step up its due diligence for future investments.

Sequoia partners said this in a call with investors after having written off a $150 million investment in FTX earlier this month, the Wall Street Journal reported Tuesday (Nov. 22), citing unnamed sources.

In the call, partners also said that Sequoia Capital had conducted due diligence on FTX, that the firm believed it was misled about FTX’s ties to Alameda Research and that it will in the future have the financial statements of startups it is looking into audited by a Big Four accounting firm, according to the report.

Sequoia Capital did not immediately respond to PYMNTS’ request for comment.

It was FTX’s connections to Alameda Research that ultimately put FTX on the road to bankruptcy earlier this month. Reports that Alameda Research — FTX’s sister trading fund — was significantly exposed to FTX’s FTT token, which underpinned its apparent solvency, ultimately led to a “run” on FTX.

As PYMNTS’ Karen Webster wrote on Nov. 14, Sequoia published a profile of FTX and its founder Sam Bankman-Fried (SBF) in September that was one of many puffed-up pieces about them published in the months before the crypto exchange’s bankruptcy.

“Am I talking to the world’s first trillionaire?” the profile’s author asked a Sequoia partner, who replied, “Yes, I think [SBF] has a real chance at that.”

During an investor pitch to the Sequoia partners via Zoom in July 2021, the partners fixated on the fact that SBF was answering their questions while in the middle of playing a video game. Declared a multitasking genius, he was called in the Sequoia profile a “10 out of 10.”