Doug Leone, billionaire venture capitalist at investment firm Sequoia Capital, said his firm had done “careful due diligence” when investing in now-bankrupt crypto exchange FTX, according to CNBC Friday.
Leone’s comments, made at a startup conference in Helsinki, Finland, come eight days after a liquidity crunch at FTX — which eventually bankrupted the firm and erased the $16 billion fortune of founder and former CEO Sam Bankman-Fried, amid allegations that the company mishandled billions of dollars worth of customers funds and defrauded investors — prompted Sequoia to mark down the value of its $210 million investment in the company to zero, according to CNBC. Sequoia had published a profile on Bankman-Fried on Sept. 22, which noted that Sequoia offered funding to FTX following a “last-minute Zoom call” during which Bankman-Fried played a video game. (RELATED: Disgraced Crypto CEO Took $1 Billion Loan From His Own Hedge Fund — That He Reportedly Bailed Out With Client Money)
“We’ve looked at it,” said Leone, according to CNBC. “There’s nothing much we could have done differently.”
Bankman-Fried has since stepped down as the CEO, with incoming CEO John J. Ray III describing the situation at FTX as a “complete failure of corporate controls.” Ray, an expert in high-profile bankruptcy proceedings, notably helmed energy firm Enron during its historic bankruptcy, and has acquired a reputation for his ability to secure larger-than-expected recoveries for clients, according to Reuters.
“Never in my career have I seen… such a complete absence of trustworthy financial information as occurred here,” Ray said in a court filing Thursday. He also slammed the company for “compromised systems integrity” and concentrating power with a “a very small group of inexperienced, unsophisticated and potentially compromised individuals.”
Following the meeting described in Sequoia’s profile, “[w]e were incredibly impressed,” said Michelle Bailhe, a partner in the investment firm’s growth team, according to the Sequoia. “It was one of those your-hair is blown-back type of meetings.”
The investment firm has since taken down the profile, and the webpage now directs users to a Nov. 9 press release announcing the marked-down investment and responding to the situation.
“We are in the business of taking risk,” the statement reads. “Some investments will surprise to the upside, and some will surprise to the downside. We do not take this responsibility lightly and do extensive research and thorough diligence on every investment we make.”
Sequoia did not immediately respond to a Daily Caller News Foundation request for comment.
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