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: FTX problems mean big headaches for its private equity investors

Privately-held FTX’s pending sale to its rival Binance could suck out billions in net worth not only from FTX founder Sam Bankman-Fried’s fortune, but also a deep bench of blue chip investors in the digital currency exchange.

While Bloomberg reported that Bankman-Fried stands to lose $13.6 billion in net worth in Tuesday’s surprise announcement of a cash crunch and sale to Binance at FTX, the company’s rapidly falling fortunes will deal a multi-billion dollar blow to the most powerful names in venture capital and private equity that have backed FTX.

It’s also possible that the acquisition may not go through, which would leave FTX short of capital and would likely impact its private valuation further.

See: Crypto investors rattled as Binance reportedly leans against completing its acquisition of rival FTX

The private investors in FTX include BlackRock Inc.
Sequoia, Ontario Teachers’ Pension Plan, Softbank Group Corp.
Tiger Global Management, Ribbit Capital, Temasek and Lightspeed Venture Partners. A spokesperson from BlackRock did not reply to an inquiry from MarketWatch.

Those investors were part of a group of 69 that took part in a $421 million funding round in FTX in October 2021 at a company valuation of $24 billion. By September 2022, FTX’s valuation reportedly climbed to $32 billion as the company started raising an additional $1 billion in funding, as reported by CNBC and others.

Now the investment by these and other firms could be worth much less if FTX has trouble generating cash and handling withdrawals by account holders.

One placement agent in the private fundraising sector told MarketWatch the situation at FTX will likely chill venture capital and private equity interest in blockchain and cryptocurrency businesses, particularly in funds specializing in digital currencies.

The situation at FTX has also sparked steep losses in the cryptocurrency markets themselves on the heels of the Binance/FTX deal announcement.

Also Read: Bitcoin falls to two-year low after crypto exchange Binance proposed to buy rival FTX

Other names in the long list of investors in FTX include Insight Venture Management, NEA Management, Paradigm Medical Industries, Coinbase Ventures
Izzy Englander, Institutional Venture Partners and Lux Capital Group.

Quarterback Tom Brady and his ex-wife Giselle Bundchen are listed as angel investors, according to data from FactSet.

The potential blowup at FTX comes about 18 months after the former American Airlines Arena in Miami was re-branded as FTX Arena after FTX paid $135 million for naming rights to FTX Stadium in Miami, home of the NBA team the Miami Heat.

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