Temasek, Sequoia Capital, Softbank, leading VCs face lawsuit for “abetting” FTX fraud

cointelegraph.com:

Eighteen leading venture capital (VC) investment firms, including Temasek, Sequoia Capital, Sino Global and Softbank, have been named as defendants in a class-action lawsuit filed in the United States District Court for the Northern District of California for their links to the now-bankrupt crypto exchange FTX.

The lawsuit, filed on Aug.7, alleged that the investment firms were responsible 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 finances, audits and regulatory checks, saying it found no red flags. The suit reads:

The suit further alleged that these VC firms vouched for the safety and stability of FTX and advertised the exchange’s purported attempts to become properly regulated.

Temasek was one of the early investors in FTX with a $275 million investment. However, after the collapse of the crypto exchange in November 2022, the investment firm wrote off its entire investment and even slashed compensation for