Singapore’s sovereign wealth fund, Temasek Holdings, has accepted “collective accountability” for its unfortunate investment of $275 million in the collapsed cryptocurrency exchange, FTX. The fund revealed that fraudulent conduct, intentionally concealed from investors, had played a significant role in the investment’s failure.
In a statement released on Monday, Temasek Chairman Lim Boon Heng addressed the issue, stating that while there was no misconduct by the investment team in their decision-making process, the team and senior management took responsibility for the investment outcome. As a result, their compensation has been reduced.
FTX, which experienced a collapse in November, prompted Temasek to write off the entire investment shortly after the incident occurred. The initial investment included $210 million, accounting for 1% of FTX International, and $65 million, representing 1.5% of FTX.US. These figures amounted to a mere 0.09% of Temasek’s net portfolio value of $293.5 billion from the previous year.
At the time of the investment, Temasek claimed to have conducted an extensive eight-month due diligence process on FTX. This involved a thorough review of audited financial statements, analysis of regulatory risks, and assessment of cybersecurity threats. However, fraudulent conduct intentionally hidden from investors compromised their ability to make an informed investment decision.
Following the collapse of FTX, Temasek emphasized its intention to refine its investment appraisal procedures, particularly for rapidly growing firms. The fund reiterated that it does not plan to invest in cryptocurrencies and will exercise caution when considering new investments in the blockchain space. Notably, FTX was the only investment Temasek held in a cryptocurrency exchange.
During FTX’s peak, the platform was accessible to users based in Singapore, while its main competitor, Binance, was blocked. The Monetary Authority of Singapore (MAS) added Binance to the Investor Alert List in September 2021 but did not take similar action against FTX. MAS later clarified that this was because Binance directly solicited Singaporean customers and offered trades in Singapore dollars, which was not true for FTX.
Temasek’s pledge to take collective accountability for the FTX investment loss demonstrates the fund’s commitment to transparency and integrity. As the sovereign wealth fund aims to learn from this incident, it seeks to bolster its investment appraisal procedures to ensure more robust decision-making in the future, particularly in the rapidly evolving cryptocurrency and blockchain sectors.
