Top VC firms face lawsuit for ‘aiding and abetting’ collapsed crypto exchange FTX

San Francisco: Several top venture capital firms like Temasek, Sino Global, and Softbank have been named as defendants in a class-action lawsuit filed by crypto investors in the US for their roles in the collapse of crypto exchange FTX.

The lawsuit, filed in the US District Court for the Northern District of California, accuses the VC firms of “aiding and abetting” and possibly “actively participating” in the FTX Group’s massive multibillion-dollar global fraud, reports South China Morning Post.

“Without the multinational VC defendants, the largest financial fraud in US history would not have occurred,” the plaintiffs alleged.

The VC firms did not comment on the lawsuit.

The VC firms faced huge losses and increasing public scrutiny since FTX’s sudden collapse.

“The companies ploughed billions of dollars into what was once the world’s second-largest cryptocurrency exchange, which saw its valuation swell to $32 billion in January 2022,” the report said.

In a separate class-action suit, US-based VC firms Sequoia Capital, Paradigm, and Thoma Bravo were named as defendants for allegedly promoting the use of FTX platforms.

Temasek invested $210 million into FTX International and $65 million into FTX US.

Last November, the investment firm said it was writing down its entire investment in the exchange, and that its trust in FTX Co-founder and CEO Sam Bankman-Fried had been “misplaced”.

Sino Global recently filed a claim of $67.3 million against FTX Trading. The new lawsuit alleged that the defendants used their “power, influence and deep pockets to launch FTX’s house of cards to its multibillion-dollar scale”.

Bankman-Fried, founder and head of FTX that went bankrupt in November 2022, is now facing jail. He is accused of stealing money from FTX customers for lavish purchases for himself, donations to politicians, and risky trade deals.

Campaign finance charges against Bankman-Fried are still on and will be included in an indictment next week against him.

Bankman-Fried faces decades in prison if convicted on the original seven-count indictment, which centres around an alleged multibillion-dollar fraud against FTX investors.

–IANS