FTX Investor Lawsuit Targets VC Giants Sequoia & Paradigm
As more lawsuits continue, the investor community has been left with deep scarring from the fallout of FTX’s crypto exchange. The latest FTX investor lawsuit charges venture capital and private equity titans Paradigm, Sequoia Capital and Thoma Bravo with promoting the legitimacy and operation of FTX.
The class action lawsuit was filed on Tuesday, February 14th. It claims that investors were able to sue the firms for participating in promotional marketing campaigns in 2021 in order to flex their investments of several hundred million dollars across FTX entities. The lawsuit claims that the marketing campaigns gave FTX an “air of legitimacy”.
Investors claimed that they were in violation of numerous federal and state laws. This includes false advertising, misrepresentation and civil conspiracy. The lawsuit contains the following:
“Defendants’ large investments in FTX entities led to each being incentivized by the other to leverage their professional reputations, media outreach capabilities, and portray FTX as a trusted and legitimate crypto exchange.”
VC firms have been heavily criticised for investing large sums in FTX despite its high valuations in 2021. The crypto exchange had a $32 billion valuation before it crashed last year.
Sequoia Capital was particularly criticised for its support of Sam Bankman-Fried, despite his casual conduct during investor meetings. SBF was reportedly playing games during these meetings. Sequoia wrote a 14,000 word profile for SBF, titled “Sam Bankman Fried Has a Savior Complex — and Maybe You Should Too”.
Sequoia Writes Off Losses In FTX
Sequoia Capital took immediate action to reduce its $214 million investment in crypto exchange FTX.
Sequoia sent investors a message saying that it was in the business “taking risks.” Some investments will surprise to surprise, and others will surprise to surprise,” Sequoia wrote to investors.
The new team at FTX is working to recover investors’ funds. They have so far recovered more than $5 billion.
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