VC Firms Sued for Funding FTX Exchange

August 10, 2023

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According to recent reports, eighteen major venture capital (VC) investment companies, including Temasek, Sequoia Capital, Sino Global, and Softbank, are among those which are accused in a class-action lawsuit that was presented in the United States District Court for the Northern District of California for their financial connection to the now-defunct cryptocurrency exchange FTX.

VCs Funded FTX’s House of Cards

According to the complaint, the defendants utilized their “power, influence, and deep pockets to launch FTX’s house of cards to its multibillion-dollar scale.”

In accordance with the lawsuit, filed on August 7, the investment companies were “aiding and abetting” the FTX fraud. According to the lawsuit, these VC companies “perpetrated, conspired to perpetrate, and/or aided and abetted the FTX Group’s multi-billion-dollar frauds for their own financial and professional gain.”

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No Violations Discovered

The suit reads: “The Multinational VC Defendants also made numerous deceptive and misleading statements of their own about FTX’s business, finances, operations, and prospects for the purpose of inducing customers to invest, trade, and/or deposit assets with FTX.“

As an example, the complaining parties asserted that Temasek claimed to have done an eight-month study of the exchange’s finances, audits, and regulatory checks, claiming that it discovered no violations of the law.

VCs Distancing Themselves from FTX

On the other hand, Temasek Holdings, once a major investor for FTX, declared its decision to put off all of its stake in the platform following the exchange’s demise.

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Celebrities Under Regulatory Scrutiny as well

In the wake of promoting the illegal enterprises, consumers and authorities are strongly investigating a number of celebrities. Following the FTX’s demise, a number of celebrities, such as tennis star Naomi Osaka and NFL quarterback Tom Brady as well as Stephen Curry NBA point guard, were under the regulatory claws given that they had participated in the promotion of FTX, and they were all included as respondents in the court case.

In March, Tom Nash, a crypto YouTuber, received a notice of class-action complaint alleging that influencers had a “major role” in the FTX scandal. It was also stated that the crypto exchange wouldn’t have gotten to this point without their support and “hype.”