The fallout of the crypto exchange FTX has left deep scars on the investor community as more lawsuits continue. In the latest FTX investor lawsuit, venture capital and private equity giants like Sequoia Capital, Paradigm, and Thoma Bravo were accused in a lawsuit promoting the legitimacy of FTX.
Filed on Tuesday, February 14, the class action lawsuit on behalf of investors alleges that the firms participated in promotional marketing campaigns in 2021 to flex their investments worth several hundred million dollars across FTX entities. The lawsuit claims that the marketing campaigns provided an air of legitimacy to now-bankrupt FTX.
VC firms have faced massive criticism for investing huge sums in FTX even at 2021’s towering valuations. Before its collapse last year, the crypto exchange pegged a valuation of $32 billion.
Sequoia Capital, in particular, faced strong criticism as the VC giant continued to back Sam Bankman-Fried even on his casual behavior during investor meetings. SBF was reportedly playing games during these meetings.
Shortly after FTX filed for bankruptcy, Sequoia Capital decided to write down in full its $214 million investment in the crypto exchange
In aWe are in the business of taking risks. Some investments will surprise to the upside, and some will surprise to the downside.” The VC giant, however, claims that it did significant due diligence on FTX’s operations, notes the complaint.
The new team appointed at FTX has been working on the recovery of investors’ funds. So far, they have recovered north of $5 billion.