The Ontario Teachers’ Pension Plan Board says its potential exposure to fallout from troubled cryptocurrency exchange FTX, in which a total of US$95 million was invested in two tranches, is limited to less than 0.05 per cent of the plan’s total net assets.
“While there is uncertainty about the future of FTX, any financial loss on this investment will have limited impact on the Plan,” the statement said.
Teachers participated in two funding rounds for the Bahamas-based crypto exchange in late 2021 and early this year. The investment size had not previously been disclosed, but the stake was not on the pension fund’s list of investments over $200 million in the pension’s 2021 annual report.
On Thursday, Teachers said its first investment totalled US$75 million in both FTX International and its U.S. entity called FTX.US. In January 2022, a follow-on investment of US$20 million in FTX.US.
Earlier this week, the crypto exchange faced a liquidity crunch and was going to be bought by larger rival Binance Holdings Ltd. However, that non-binding offer to purchase was called off late Wednesday.
In a tweet, Binance said it would not move forward to purchase FTX as a result of “corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations.”
Ontario Teachers made the investment in FTX through its venture arm, which was created in 2019 to invest in emerging technology companies raising late-stage venture and growth capital.
Thursday’s statement said Teachers’ Venture Growth (TVG) investments are structured to provide the Ontario pension fund with returns “commensurate with the risk undertaken” and to provide proprietary insights that inform investing elsewhere across the plan.
“Naturally, not all of the investments in this early-stage asset class perform to expectations,” the statement said. “However since inception, TVG has delivered solidly on intended objectives.”
In April, Olivia Steedman, who leads the venture platform that invested in FTX, said part of her mandate at Teachers is to look at “technology that’s shaping future markets” and that she believed digital assets “are here to stay.” Steedman made the distinction that FTX was an exchange, rather than a cryptocurrency, and said the investment resembled a type of infrastructure play for the diversified pension fund.
The Teachers’ plan had total net assets of $242.5 billion as of June 30, 2022.
FTX was a high-flyer in the crypto world before its spectacular fall this week. The exchange is unable to meet demands for withdrawals and bankruptcy is possible if additional funding cannot be secured, according to multiple media reports.
Founded by 30-year-old American entrepreneur Samuel Bankman-Fried, FTX pulled in investments from venture heavyweights in its heyday including Sequoia Capital, SoftBank, and Tiger Global. On Thursday, Sequoia posted a letter to limited partners on Twitter that said its investment in FTX would be marked down to zero.
A red banner at the top of FTX’s website Thursday said the crypto exchange was unable to process withdrawals and added that the company would “strongly advise against depositing.” A pop-up window advised that “registration on FTX from Ontario is not currently available.”
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