Sequoia Capital writes down entire value of its FTX stake

This illustration photo shows a smart phone screen displaying the logo of FTX, the crypto exchange platform, with a screen showing the FTX website in the background in Arlington, Virginia on February 10, 2022. Photographer: Olivier Douliery/AFP/Getty Images

Sequoia Capital wrote down the full value of its holdings in FTX, a signal the venture capital firm sees no clear path to recouping its investment in the embattled cryptocurrency exchange.

The VC firm put in about $214 million last year in FTX’s international and US businesses, Sequoia told its investors Wednesday. The writedown includes holdings of both FTX.com and FTX.us, said a spokeswoman for the firm.

“We are in the business of taking risk,” Sequoia wrote in a message to investors. “Some investments will surprise to the upside, and some will surprise to the downside.”

Sequoia is among a prominent list of backers who stand to lose big on their holdings of Sam Bankman-Fried’s FTX. Others include BlackRock Inc., Tiger Global Management and SoftBank Group Corp.

A smaller venture fund, Multicoin Capital, told investors Wednesday that about 10% of its assets under management were affected. “Unfortunately, we were not able to withdraw all of the Fund’s assets on FTX,” Multicoin wrote in a letter reviewed by Bloomberg.

A sudden loss of confidence in FTX.com among customers exposed deep problems with the cryptocurrency exchange. People rushed to withdraw money and sell off tokens associated with the company, causing a liquidity crunch. A rival, Binance, agreed to buy FTX.com and then pulled out over concerns with FTX’s financial health.

Bankman-Fried held a call with investors Wednesday and said FTX.com needed a cash infusion or would have to file for bankruptcy, Bloomberg reported. The US entity, FTX.us, stood at a distance from the crisis, but the Sequoia writedown indicates a lack of confidence in that asset, too.

Sequoia sought to reassure investors, saying FTX accounts for less than 3% of committed capital in the fund with the biggest exposure to FTX. That fund, Sequoia said, has realized and unrealized gains of about $7.5 billion.