In a tweet on October 12, Jesse Powell, the founder of Kraken exchange, expressed his anger towards venture capitalists (VCs) who had invested in FTX, the exchange that went bankrupt in the past. Sequoia, Paradigm, Temasek, and other major funds were involved in the investment in FTX.
According to Powell’s tweet, he strongly condemned the incompetence of these VCs, suggesting that their negligence had facilitated the notorious actions of former CEO Sam Bankman-Fried (SBF).
Powell asserted that the VCs failed to conduct thorough due diligence to uncover the company’s vulnerabilities. Instead, they were blinded by the façade created by SBF and placed too much trust in Sam’s invitations. They even overlooked the murky relationship between FTX and Alameda, which significantly impacted the overall operations of the business.
“They never thought the Alameda-FTX conflict could become a major issue,” Powell stated.
Historically, well-known VCs such as Ontario Teachers’ Pension Plan, Sequoia Capital, SoftBank, Sino Global Capital, Paradigm, Temasek, SkyBridge, and Multicoin, among others, provided substantial financial support to FTX.
Some reports also provided evidence that the FTX founder conducted online meetings with partners while playing games.
Ultimately, many prominent investors incurred substantial losses (Paradigm, Sequoia, Temasek) or had to make the decision to dissolve their companies (Galois Capital, Midas Investments). Some are facing legal actions from FTX users, accused of being complicit in the historic fraud case that shook the U.S.
Powell’s comments come amid the trial of Sam Bankman-Fried taking place in the U.S. Shocking testimonies and evidence from former leaders like FTX co-founder Gary Wang and Alameda CEO Caroline Ellison gradually unveil the crimes of Sam and the empire.
Although FTX filed for bankruptcy in November 2022, the scandal continues to deeply impact the cryptocurrency industry. Risky investments are shrinking, coupled with legal repercussions that are constricting this sector.