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What Filing for Chapter 11 Means for FTX
What Filing for Chapter 11 Means for FTX

Big Japanese Investor Finds Itself Caught In Another Debacle

Softbank has made several investments that have led to massive losses, including WeWork.
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SoftBank Group has struck out on several its latest investments since several of them have proved to be nearly worthless.

One of the largest Japanese investors, Softbank made a bet on cryptocurrency by investing $100 million into brokerage FTX, which some investors such as Sequoia Capital said is worth zero.

SoftBank said on Friday that its investment into bankrupt crypto exchange FTX has a minimal impact in its $100 billion Softbank Vision Fund.

FTX, based in the Bahamas, was valued at $32 billion only last year.

SoftBank CFO Yoshimitsu Goto said the investment in FTX was a minor stake.

“If any case of markdown but still that is very not material for us,” Goto said during the company’s second quarter results.

Vision Fund's priority is to invest in artificial intelligence companies, not cryptocurrency, but it sees blockchain technology as more of an investment opportunity, he said.

“Investing in currency is actually a bit different from our vision,”Goto said. “Through the business of cryptocurrency there may be something that comes to the technology revolution like blockchain that can be a positive for AI. So that can be some interpretations to make an investment.”

On Friday, Masayoshi Son’s SoftBank Group reported a profit of over $21 billion last quarter after it divested its stake in Alibaba Group  (BABAF) , the Chinese e-commerce behemoth.

SoftBank Vision Fund's Investment Losses

But SoftBank now depends on its Vision Fund, which invests in startups, to generate more profit. The fund itself reported a $10 billion loss in the last quarter that ended in September.

Recent missteps from SoftBank include massive losses in shares of companies such as WeWork, a co-sharing company, DoorDash  (DASH) - Get Free Report, a food delivery company, and Compass, a real estate brokerage.

SoftBank posted a $5.8 billion markdown on its holdings of over 300 startups, including companies in autonomous driving and biotech.

Dozens of private equity and venture capital firms along with wealthy individuals such as quarterback Tom Brady invested in FTX, which was founded in 2019 by Sam Bankman-Fried.

Sequoia and SoftBank were some of the larger investors in FTX, which filed for bankruptcy on Friday.

 FTX raised $420 million in an October 2021 funding round that included Ontario Teachers' Pension Plan, Canada's third-largest pension fund. Other investors included Temasek, Sea Capital, IVP, ICONIQ Growth, Tiger Global, Ribbit Capital, Lightspeed Venture Partners, and funds and accounts managed by BlackRock.

Sequoia sent a letter to its limited partners on November 9, stating that it now values its $210 million investment in FTX as $0 and that it was a total loss.

"Based on our current understanding, we are marking our investment down to $0,” the Silicon Valley-based firm said. “The fund remains in good shape,” it said on its Twitter account.

Ontario Teachers' Pension Plan invested $75 million in FTX International and its U.S. entity, FTX.US, in October 2021. In January, the pension fund made an additional investment of $20 million in FTX.US.

The investment represents less than 0.05% of the fund's total net assets.

Both investments were made in U.S. dollars and through its Teachers’ Venture Growth (TVG) platform because the pension fund believed it needed to "gain small-scale exposure to an emerging area in the financial technology sector."

The pension fund, which ranks among the top 20 globally in terms of assets, manages $242 billion in assets for 330,000 current and retired teachers.