Following news that Temasek Holdings will write down over US$200 million ($274 million) into cryptocurrency firm FTX before its implosion, Singapore’s state-owned investor issued a statement on Nov 17 explaining its decision to put money into the crypto firm.
According to Temasek, the reason behind its investment in FTX was to invest in a leading digital asset exchange that provides it with “protocol agnostic and market neutral exposure to crypto markets with a fee income model and no trading or balance sheet risk”.
The group had invested US$210 million for a minority stake of around 1% in FTX International and invested US$65 million for a minority stake of around 1.5% in FTX US across two funding rounds from October 2021 to January.
“The cost of our investment in FTX was 0.09% of our net portfolio value of $403 billion as of March 31,” Temasek revealed.
The group added that it currently has no direct exposure in cryptocurrencies and that its investment in FTX was not an investment into cryptocurrencies.
In addition to its statement, the group said that it had conducted “an extensive due diligence process” on FTX. This took around eight months from February to October 2021.
See also: Temasek to write down over US$200 million in FTX
“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,” says Temasek in its statement.
“Advice from external legal and cybersecurity specialists in key jurisdictions was sought, with legal and regulatory review done for the investments,” it adds.
“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,” it continues.
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Referring to reports that customer assets were mishandled and misused in FTX, Temasek noted that its investment with FTX and its belief in the “actions, judgment and leadership of [FTX CEO] Sam Bankman-Fried”, which were formed from the group’s interactions with him and views expressed in its discussions with others, would appear to have been misplaced.
Looking ahead, the group says it continues 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.”
