Investors have filed a proposed class-action complaint against FTX investors, including Sequoia Capital, Thoma Bravo, and Paradigm, accusing them of adding an "air of legitimacy" to their investment into the fallen crypto exchange.
According to the lawsuit, the VCs engaged in misrepresentation, civil conspiracy, and false advertising — participating in marketing campaigns in 2021 to promote their investment.
- Sequoia, Thoma Bravo, and Paradigm invested $214M, $100M, and $250M, respectively, into FTX.
- The trio participated in FTX's $900M Series B funding round in July 2021.
- The investors are accused of glorifying their investment, particularly Sequoia — which praised FTX founder and CEO Sam Bankman-Fried for playing video games during investor meetings and wrote a 14,000-word essay titled "Sam Bankman-Fried Has a Savior Complex — And Maybe You Should Too."
- Sequoia marked down its entire investment to zero after FTX, valued at $32B at its peak, filed for bankruptcy.
- The VCs maintain that they conducted sufficient due diligence before investing in FTX.
- Despite this, crypto lawyer Liam Hennessy argues that even if the due diligence was inadequate, the VCs are not liable to others.
