Eighteen main enterprise capital (VC) funding corporations, together with Temasek, Sequoia Capital, Sino International and Softbank, have been named as defendants in a class-action lawsuit filed in the US District Courtroom for the Northern District of California for his or her hyperlinks to the now-bankrupt crypto trade FTX.
The lawsuit, filed on Aug.7, alleged that the funding corporations have been accountable for “aiding and abetting” the FTX fraud. The suit claims that the defendants used their “power, influence and deep pockets to launch FTX’s house of cards to its multibillion-dollar scale.”
The lawsuit states that the FTX cryptocurrency exchange violated several securities laws and stole customers’ funds while the defendant VCs offered an elusive picture of the exchange, claiming they had done their due diligence. Thus, these VC firms directly “perpetrated, conspired to perpetrate, and/or aided and abetted the FTX Group’s multi-billion-dollar frauds for their own financial and professional gain,” the lawsuit claims.
While discussing the role of VC firms in aiding and abating FTX fraud, the plaintiffs cited the example of Temasek and its statement regarding the financial conditions of FTX. Temasek claims it conducted an eight-month-long extensive review of FTX’s funds, audits and regulatory checks, saying it discovered no purple flags. The swimsuit reads:
“The Multinational VC Defendants additionally made quite a few misleading and deceptive statements of their very own about FTX’s enterprise, funds, operations, and prospects for the aim of inducing prospects to take a position, commerce, and/or deposit belongings with FTX.“
The swimsuit additional alleged that these VC corporations vouched for the protection and stability of the FTX and marketed FTX’s purported makes an attempt to grow to be correctly regulated.
Temasek was one of many early traders within the FTX crypto trade with a $275 million funding, however, after the collapse of the crypto trade in November. The funding agency wrote off its total funding within the trade later and later even slashed compensation for the executives who have been accountable for the FTX funding.
Temasek being a state-backed funding agency additionally put the Singaporean government in a hot seat over its failure to curb such funding,
FTX collapse created a crypto contagion and forged a shadow of doubt on your complete crypto ecosystem resulting in a drought in institutional crypto funding for months.