Eighteen prominent venture capital firms, including Temasek, Sequoia Capital, Sino Global, and Softbank, face a class-action lawsuit for their alleged role in aiding the FTX crypto exchange fraud.
A class-action lawsuit filed in the United States District Court for the Northern District of California implicates eighteen leading venture capital investment firms in connection with the now-bankrupt FTX crypto exchange. The lawsuit alleges that these investment firms, such as Temasek, Sequoia Capital, Sino Global, and Softbank, were responsible for "aiding and abetting" FTX's fraudulent activities.
The suit claims that the defendants used their "power, influence, and deep pockets" to build FTX's multi-billion-dollar fraud, despite multiple violations of securities laws and instances of customer fund theft. The plaintiffs argue that the VC firms allowed these activities for their personal financial and professional gain, offering an illusory picture of the exchange after supposedly completing their due diligence.
According to the suit, the VC firms made numerous deceptive and misleading statements, such as Temasek claiming to have conducted an 8-month-long review of FTX's finances and finding no red flags. These statements were designed to induce customers to invest, trade, and deposit assets with FTX. Furthermore, the VC firms are accused of vouching for the safety, stability, and regulatory compliance of the FTX crypto exchange.
Following the collapse of FTX, Temasek wrote off its $275 million investment and even reduced the compensation of executives responsible for the FTX investment. The Singaporean state-backed investment firm's failures brought the nation's government into the spotlight as well.
The FTX collapse led to a crypto contagion that shook confidence in the entire crypto ecosystem and resulted in a lack of institutional investment interest for months.
