VC Firms like Sequoia and Softbank face lawsuit for alleged role in FTX fraud
The VCs provided an unreliable representation of FTX, claiming to have conducted due diligence, while FTX violated securities laws and misappropriated client funds.
A lawsuit filed on 7 August alleges that several investment companies played a role in facilitating the FTX fraud by using their power, influence, and financial resources to support the growth of the exchange.
The complaint asserts that the VCs provided an unreliable representation of FTX and claimed to have conducted due diligence while the exchange violated securities laws and misappropriated client funds.
The list of defendants includes several high-profile VC firms, such as Sequoia Capital and Softbank Group. The lawsuit also notes that Temasek, one of FTX’s earliest investors, wrote off its entire investment once the exchange failed in November 2022 and reduced bonuses for the executives overseeing the venture.
While the lawsuit was filed in California, the plaintiffs’ lawyers intend to request a transfer of the lawsuit to Florida, where a number of lawsuits connected to the FTX exchange’s collapse have been consolidated under a single judge.
About author
DW Team
The GIP Digital Watch Observatory team, consisting of over 30 digital policy experts from around the world, excels in the fields of research and analysis on digital policy issues. The team is backed by the creative prowess of Creative Lab Diplo and the technical expertise of the Diplo tech team.