Temasek’s $275 Million Crypto Blunder Leads to Lowered Pay for Management

The investment firm Temasek Holdings Pte, which invested $275 million in the cryptocurrency exchange FTX, announced at the beginning of the week that it has reduced the remuneration of the investment team and executive management responsible for the decision to invest in the now-defunct company.

‘Collective Accountability’ for FTX Failure

Although Temasek found no misconduct in the activities of its traders, the Singaporean company decided to impose 'collective accountability' on the individuals who led to the investment in FTX. As a result, their compensation was reduced.

After FTX declared bankruptcy in November of last year and triggered a sell-off wave in the digital asset market, Temasek wrote off $275 million of the investment.

"As alleged by prosecutors and as admitted by key executives at FTX and its affiliates, there was fraudulent conduct intentionally hidden from investors, including Temasek. We are disappointed with the outcome of our investment and the negative impact on our reputation," Lim Boon Heng, the Chairman of Temasek, said in a statement.

The company claimed it had thoroughly reviewed FTX's activities and financial statements before investing in Sam Bankman-Fried's business and had received positive results from its assessment. At first glance, FTX seemed to be a profitable and stable business.

However, a run on customer deposits led to a liquidity crisis for the exchange, and the value of its assets began to decrease drastically.

Temasek has made a statement on the FTX fraudAdmits damage to their reputationCompensation of employees reducedWhile FTX creditors lose their life savings, mental health and some reported suicides - not exactly fair pic.twitter.com/VOCkf8AfSG

From $1b in Revenues to a Sudden Collapse

FTX had initially established itself as one of the most trustworthy crypto exchanges. The platform's Founder and CEO, an ex-Wall Street quantitative trader who also helmed Alameda Research, had carved a niche for himself as a vocal personality in the crypto sphere and had amassed considerable wealth through these ventures.

However, FTX's troubles began to unfold in November 2022. Changpeng Zhao, the Founder and CEO of Binance, confirmed the decision to divest their holdings of FTX's native FTT tokens, casting doubt over the financial solidity of their competitor. Binance had come into possession of these FTT tokens by selling its stake in FTX.

Although Zhao didn't provide specific reasons, his decision was likely influenced by Coindesk's report that shed light on the financial state of Alameda Research, Bankman-Fried's trading firm. As of the end of June 2022, Alameda's assets stood at a substantial $14.6 billion, with 'unlocked FTT' accounting for $3.66 billion, the largest asset entry, and 'FTT collateral' making up another $2.16 billion, the third largest asset category.

At one point, the market was hopeful that Binance might step in to rescue FTX. However, Zhao withdrew his proposal, which served as the final blow to FTX. Given its association with Alameda Research, FTX had links to several prominent funds and other crypto companies. In the wake of FTX's problems, this relationship sparked widespread market fear, leading to the downfall of several other businesses as well.

In one of the most recent updates regarding the fallen exchange, the US Department of Treasury and Internal Revenue Service (IRS) has filed 45 claims, totaling about $44 billion, against the company and its affiliates.