FTX Investor Lawsuit Targets VC Giants Sequoia and Paradigm

The lawsuit on behalf of FTX investors accuses Sequoia Capital and VC giants of misrepresentation, false advertising and civil conspiracy.
By Bhushan Akolkar
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The fallout of the crypto exchange FTX has left deep scars on the investor community as more lawsuits continue. In the latest FTX investor lawsuit, venture capital and private equity giants like Sequoia Capital, Paradigm, and Thoma Bravo were accused in a lawsuit promoting the legitimacy of FTX.

Filed on Tuesday, February 14, the class action lawsuit on behalf of investors alleges that the firms participated in promotional marketing campaigns in 2021 to flex their investments worth several hundred million dollars across FTX entities. The lawsuit alleges that the marketing campaigns provided an “air of legitimacy” to now bankrupt FTX.

Investors alleged the violation of several stated and federal laws. This includes false advertising, misrepresentation, and civil conspiracy. The lawsuit notes:

“As a result of defendants’ significant investments in the FTX entities, each was incentivized to leverage their professional reputations and media outreach capabilities to portray FTX as a trustworthy and legitimate crypto exchange”.

VC firms have faced massive criticism for investing huge sums in FTX even at 2021’s towering valuations. Before its collapse last year, the crypto exchange pegged a valuation of $32 billion.

Sequoia Capital, in particular, faced strong criticism as the VC giant continued to back Sam Bankman-Fried even on his casual behavior during investor meetings. SBF was reportedly playing games during these meetings. Interestingly, Sequoia also wrote a 14,000-word profile for SBF titled “Sam Bankman-Fried Has a Savior Complex — And Maybe You Should Too”.

Sequoia Writes Off Losses In FTX

Shortly after FTX filed for bankruptcy, Sequoia Capital decided to write down in full its $214 million investment in the crypto exchange.

In a message to investors, Sequoia wrote: “We are in the business of taking risks. Some investments will surprise to the upside, and some will surprise to the downside.” The VC giant, however, claims that it did significant due diligence on FTX’s operations, notes the complaint.

The new team appointed at FTX has been working on the recovery of investors’ funds. So far, they have recovered north of $5 billion.

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Bhushan Akolkar
Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets. 

He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills. Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.
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