Paradigm regrets its investment in FTX

Paradigm “deeply regrets” its investment in the cryptocurrency exchange FTX, said Matt Huang, co-founder and managing partner of the investment firm.

Facts are still coming to light, and there will be many lessons to learn. We feel deep regret for having invested in a founder and company who ultimately did not align with crypto’s values and who have done enormous damage to the ecosystem.

— Matt Huang (@matthuang) November 15, 2022

“We are shocked by revelations about FTX, Alameda and SBF [Sam Bankman-Fried]. The facts are still emerging, and there will be many lessons to learn. We deeply regret investing in the founder and the company, which ultimately did not align with crypto’s values and caused enormous damage to the ecosystem,” wrote the co-founder of Paradigm.

According to him, the investment in the platform accounted for “a small part of Paradigm’s total assets” and is now “written down to zero.”

“We never traded on FTX and did not have assets on the exchange. We never invested in related tokens, such as FTT, SRM, MAPS or OXY,” Huang emphasized.

He added that the collapse of the company has caused some to question the value of crypto. However, the Paradigm co-founder sees the problem as lying with the exchange itself, FTX’s Bankman-Fried. In his view, this is precisely what decentralized finance can address through increased transparency and security.

The blow-up of FTX has caused some to question crypto’s value. But the issues at FTX are precisely ones that decentralized finance can solve through increased transparency and security. Crises such as this one help to clarify the true merits of what we’re all building towards.

— Matt Huang (@matthuang) November 15, 2022

“Such crises help to clarify the true merits of what we’re all striving for,” Huang explained.

In 2021, Paradigm invested in FTX as part of a record-breaking-for-the-industry round of Series B funding worth $900 million.

In January 2022, the firm backed the exchange’s U.S. arm — the unit raised $400 million at a valuation of $8 billion. At the same time, FTX announced that it had secured a similar amount from investors, among whom was Paradigm. Its valuation rose to $32 billion.

Earlier, Sequoia Capital also acknowledged losses on its investments in FTX. According to the venture firm’s calculations, they exceeded $213 million.

According to Crypto Fund Research, losses among crypto funds due to the exchange’s bankruptcy could amount to as much as $5 billion. The crisis has affected 25-40% of the industry’s investment structures that had funds invested in the platform or its utility token FTT, experts noted.

On November 11, FTX Group filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. Bankman-Fried stepped down as CEO.

According to court documents, the operator of the Bitcoin exchange has more than one million creditors. Bloomberg deemed it unlikely that customers would recover their funds.

CEO Binance Changpeng Zhao compared the current state of the industry to the 2008 financial crisis. In his view, even more companies could fail in the near term.

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