Prominent hedge funds, including Tiger Global Management, Altimeter Capital Management, and Third point, had participated in the funding round of FTX. The one high-flying Sam Bankman- Fried crypto exchange now struggles to stay afloat as it faces wipe out.
Regulators descend on FTX, and the so-called buyout by rival Binance seems uncertain. Angel investors included Izzy Englander of Millennium Management, Paul Tudor Jones, and Alan Howard of Brevan Howard Asset Management. Celebrities included Tom Brady and Gisele Bundchen.
Earlier this year, FTX’s market value was $32.5 billion, but the firm faced a liquidity crunch suddenly. Binance Chairman Chang Peng Zhao, popular as “CZ,” tweeted that his exchange was exploring taking over FTX.
US regulators are probing the misuse of client’s funds by FTX and the exchange relationships with other companies controlled by Bankman-Fried. Binance executives raised concerns during the due diligence process of FTX.
Bankman-Fried Business Empire includes Alameda Research, the trading firm that Bankman-fried founded before he launched FTX in 2019. The relationship between the two entities gathered a lot of attention.
Big Names
FTX also attracted investments from Sequoia Capital, Ontario Teachers’ Pension Plan Fund, Iconiq Capital, Lightspeed Venture Partners, Insight Partners, Softbank group corp., and Thoma Bravo. These investors look set to lose all their capital invested in FTX.
Representatives of all the firms and individuals connected to these companies declined to comment.
Bullish Valuation
In December 2019, the Ontario teacher’s pension plan and tiger Global Management invested in FTX when the company was valued at4 8 billion during that funding round, as per data from the pitchbook. In October 2021, both investors increased their exposure in FTX, giving it a $25 billion valuation, and again in January 2022. In July 2021, other individuals and firms participated in a funding round where they invested cash in a $1 billion funding that raised FTX value to $18 billion.
The volatile world of cryptocurrencies showed how fast an empire could crumble after the sudden collapse of FTX. A drop in investor sentiment in the market or on the company can cause a run on the assets. Bankman-Fried had amassed a fortune of $20 billion and was one the prominent personalities in the crypto industry.
The present fiasco has highlighted how risks associated with start-ups who raise their valuation in overheated markets find the company struggling amidst volatility and surging inflation.
Launchpad Capital founder Ryan Gilbert said that good diligence is required even when the market is bullish, and investors are to be held accountable if they are not diligent. Launchpad is a venture firm that focuses on finance technology but does not have FTX in its asset portfolio.
