Temasek Cuts Staff Salaries Responsible for Unsuccessful $275 Million Investment in FTX

Jimmy Aki
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Singapore state investor Temasek has cut off compensation for the employees responsible for the failed $275 million investment in the now-bankrupt FTX crypto exchange.

Taking Collective Responsibility

Singapore’s sovereign wealth fund, Temasek Holdings, has taken a significant hit after a failed $275 million investment in the now-defunct FTX.

As a result, the organization has decided to cut the pay of employees involved in the investment.

According to a statement released on November 17, 2022, Temasek made two separate investments in FTX International and FTX US.

In October 2021, the company invested $210 million to acquire a 1% stake in FTX International. Subsequently, in January 2022, they invested an additional $65 million to obtain a 1.5% stake in FTX US.

However, following the bankruptcy filing of Sam Bankman-Fried’s cryptocurrency group in November 2022, Temasek wrote off the entire investment.

The company noted that the investment cost in FTX accounted for only 0.09% of its net portfolio value, which amounted to S$403 billion ($304 billion) as of March 31, 2022.

Additionally, Temasek clarified that it currently has no direct involvement with or exposure to cryptocurrencies.

The prominent global investor expressed dissatisfaction with the investment and its adverse impact on the company’s reputation following criticism for supporting the crypto startup.

The company clarified on Monday that the investment team did not engage in any misconduct when making the investment recommendation.

However, both the investment team and senior management, who hold ultimate responsibility for investment decisions, collectively took accountability and faced a reduction in their compensation.

However, the exact extent of the compensation reduction was not disclosed.

This decision is part of Temasek’s effort to reassess its risk management strategies and enhance prudent decision-making.

Temasek Faces Criticism

The fallout surrounding FTX and the losses suffered by individual investors has led to uncommon public criticism of Temasek, raising doubts about the extent of due diligence conducted by the organization.

However, skeptics are casting doubt on whether basic checks were performed on the crypto startup, which once achieved a valuation of $40 billion, with Bankman-Fried serving as a prominent figure in the crypto industry.

However, Temasek defended its extensive “eight-month due diligence” process but admitted that its trust in the former FTX CEO was misplaced.

According to Financial Times, one notable investor in the private equity sector stated, “It was a risky investment, and Temasek appears foolish for claiming to have conducted eight months of due diligence.

“They should have openly acknowledged that they took a gamble, it didn’t work out, and apologized.”

In a Facebook post, Ho Ching, the former CEO of Temasek and wife of Singapore’s leader Lee Hsien Loong, referred to the loss as “embarrassing.”

However, she defended Temasek’s overall investment strategy, noting that some of their most successful investments were made by going against the grain.

Furthermore, during a parliamentary session, Singapore’s Finance Minister and, concurrently, Temasek Chairman, Wong, stated that FTX’s collapse would have limited repercussions on the broader financial system of the city-state.

The failure of Temasek’s investment has further eroded confidence in Singapore’s ability to regulate the digital asset industry.

Singapore had actively encouraged crypto companies to establish operations in the country and allowed individual and institutional investors to trade in this high-risk asset class.

However, a series of crypto-related failures in 2022, including the collapse of Three Arrows Capital and Hodlnaut, have brought Singapore’s regulatory practices under scrutiny.

Temasek’s decision to cut pay is only one part of a broader effort to enhance risk management practices within the organization.

The sovereign wealth fund is expected to implement more rigorous investment evaluation processes, including comprehensive due diligence and stress-testing methods.

By bolstering its risk assessment capabilities, Temasek aims to identify potential pitfalls and avoid investments that do not align with its risk appetite.

On the other hand, Bankman-Fried – charged by U.S. federal prosecutors for allegedly utilizing customer funds from FTX to aid his unsuccessful cryptocurrency trading venture, Alameda Research – has pleaded not guilty to all the accusations.

He is currently awaiting a trial scheduled for October 2023, and in the event of a conviction, he could potentially face a life sentence in prison.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.