Some of the biggest institutional investors are starting to measure their potential exposure to FTX, one of the world's largest cryptocurrency exchanges, which filed for bankruptcy Friday.
Those institutions include the Ontario Teachers' Pension Plan, which was a direct investor in FTX. The Alaska Permanent Fund Corp., the Washington State Investment Board and other institutions were indirect investors via Sequoia Capital and other venture capital firms.
Among investors in Institutional Venture Partners fund with exposure to FTX are Tennessee Consolidated Retirement System; City & County of San Francisco Employees' Retirement System; Maryland State Retirement & Pension System; and Alaska Permanent Fund Corp.
Illinois Municipal Retirement Fund was invested in Lightspeed Venture Partners, which also had exposure to FTX.
Late Wednesday, Sequoia, a lead investor in FTX, sent a letter to its limited partners saying it was going to mark down the value of its FTX investment to $0. Sequoia owned FTX and FTX.com in its Global Growth Fund III, although FTX is not one of the top 10 holdings in the fund, and its $150 million in cost basis represented less than 3% of the committed capital of the fund, according to the letter.
The $150 million loss on FTX was offset by the fund's roughly $7.5 billion realized and unrealized gains, Sequoia said in its letter.
"We are in the business of taking risk. Some investments will surprise to the upside, and some will surprise to the downside. We do not take this responsibility lightly and do extensive research and thorough due diligence on every investment we make," the letter said. "At the time of our investment in FTX, we ran a rigorous due diligence process."
In 2018, the $81 billion Alaska Permanent Fund Corp. committed $200 million to Sequoia's Global Growth Fund III, and the $161 billion Washington State Investment Board retirement system approved an allocation of up to $350 million to the same fund.
Ontario Teachers invested a total of $75 million in FTX in October last year, then another $20 million in January of 2022, the pension fund with C$242.5 billion ($178.2 billion) in assets said in a statement Thursday. The pension plan housed the FTX investment in its Teachers' Venture Growth platform. OTTP reported a 1.2% gain for the six months ended June 30 for the overall portfolio.
"Since inception, TVG has delivered solidly on intended objectives. While there is uncertainty about the future of FTX, any financial loss on this investment will have limited impact on the Plan, given this investment represents less than 0.05% of our total net assets," Ontario Teachers said in the statement.
FTX.com was valued as recently as January at $32 billion in a fundraising round from investors including Temasek, Paradigm, Ontario Teachers' Pension Plan Board and SoftBank Vision Fund 2, according to Bloomberg.
FTX founder and CEO Sam Bankman-Fried resigned Friday as CEO, and about 130 companies affiliated with FTX started voluntary bankruptcy proceedings, according to FTX's website.
Both the Securities Exchange Commission and the Commodity Futures Trading Commission are investigating FTX.
"This has been pretty shocking," Pranav Kanade, the portfolio manager of a liquid digital asset hedge fund at VanEck, said about FTX's insolvency, in an interview. "We think an event like this really sent back institutional adoption."
Other investors with direct or indirect exposure to FTX include BlackRock, Tiger Global Management, Thoma Bravo, Lightspeed Venture Partners, Senator Investment Group and VanEck, and hedge fund managers Paul Tudor Jones, Alan Howard and Israel "Izzy" Englander, according to FactSet Research Systems, Bloomberg and P&I's research database.
Venture and hedge fund funds with investments in FTX include: Sequoia Capital's Global Growth Fund III, SoftBank Vision Fund II, Insight Partners, Ribbit Capital, Third Point, Paradigm, Steadview Capital, Altimeter, BOND, New Enterprise Associates, Coinbase Ventures, Willoughby Capital, 40 North, Senator Investment Group, Sino Global Capital, Circle Ventures, Lux Capital Group, and Institutional Venture Partners, according to PitchBook data.
Aaron Cunningham, Palash Ghosh and Bloomberg contributed to this story.
