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Is there going to be any reckoning for the VCs who poured money into this ridiculous business? I don’t see how you respect Sequoia’s judgement after this.

humanizersequel 4y ago
>I don’t see how you respect Sequoia’s judgement after this. Me neither, sounds like that's the reckoning.
- kjellsbells 4y ago
  Helpfully, sequoia list who they are investing in, e.g. https://www.sequoiacap.com/our-companies/?_categories=fintech https://www.sequoiacap.com/our-companies/?_categories=fintec... or https://www.sequoiacap.com/our-companies/?_categories=crypto https://www.sequoiacap.com/our-companies/?_categories=crypto And of course you should all enjoy this while you can: https://www.sequoiacap.com/companies/ftx/ https://www.sequoiacap.com/companies/ftx/
  - nradov 4y ago
    It's hilarious how they describe the problem at FTX as a "liquidity crunch”. Liquidity was the least of their issues. What a bunch of clowns.
    - eternalban 4y ago
      Not fair. They ran a "rigorous diligence process" at the time of their investment. https://pbs.twimg.com/media/FhKq6zQUoAIUJ1W https://pbs.twimg.com/media/FhKq6zQUoAIUJ1W These two sources claim Ramnik Arora played a "crucial role": https://diyatvusa.com/2022/11/24/meet-ftx-insider-ramnik-arora/ https://diyatvusa.com/2022/11/24/meet-ftx-insider-ramnik-aro... https://podcasts.apple.com/us/podcast/who-is-ramnik-arora-the-fixer-behind-sam-bankman/id808014240?i=1000587357734 https://podcasts.apple.com/us/podcast/who-is-ramnik-arora-th... There is that Moonstone Bank thingie again: Ramnik was there too: https://www.crunchbase.com/person/ramnik-arora https://www.crunchbase.com/person/ramnik-arora https://www.crunchbase.com/organization/moonstone-bank https://www.crunchbase.com/organization/moonstone-bank Fluent Finance & Moonstone Bank issue "US+ Stable Coin": https://www.globenewswire.com/en/news-release/2022/10/24/2540281/0/en/Fluent-Finance-and-Moonstone-Bank-Accelerate-Crypto-Adoption-by-Issuing-US-Stablecoin.html https://www.globenewswire.com/en/news-release/2022/10/24/254... "Fluent Federation of Member Banks": https://www.fluent.finance/ https://www.fluent.finance/ https://www.fluent.finance/team https://www.fluent.finance/team [includes the "inventor of CBDC" ..] There are so many rabbit holes here. FTX is the tip of something bigger imo.
paulpauper 4y ago
that is why VCs are diversified
- joeblubaugh 4y ago
  I don’t mean a financial reckoning, I mean a reputational one. Why would you want to do business with such foolish people?
  - ipaddr 4y ago
    It is an advantage because taking money from stupid people is preferred
  - nkozyra 4y ago
    > Why would you want to do business with such foolish people? On the other hand, I kind of want to pitch something to them now.
jacquesm 4y ago
> I don’t see how you respect Sequoia’s judgement after this. Same for a16z, Softbank and all the others that jumped on the crypto bandwagon without doing their jobs as board members and during the run-up to the deal and after investing. Ironically, the VCs will position themselves as the victims.
- coffeebeqn 4y ago
  Did anyone respect SoftBank even before this? Their claim to fame was the botched WeWork money hole and a few other insanely overpriced rounds on unscalable/unprofitable(even in theory) businesses.
  - jacquesm 4y ago
    It's a mark of something, but not of excellence.
  - totalZero 4y ago
    Yes. SoftBank has been extremely effective in the mobile telecommunications investment space. Look up Vodafone KK and their investment in Sprint. SoftBank was SoftBank before its unprofitable/weird investments in businesses like WeWork and Boston Dynamics.
- austenallred 4y ago
  A16Z didn't invest in FTX
  - jacquesm 4y ago
    No, but they've been all over crypto: https://a16zcrypto.com/ https://a16zcrypto.com/
    - deschutes 4y ago
      Let's not forget this gem https://archive.nytimes.com/dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/ https://archive.nytimes.com/dealbook.nytimes.com/2014/01/21/...
deleted 4y ago
[deleted]
sam345 4y ago
I'm just enjoying their humiliation and reputation hit. Enjoying only so much as it is the correct free market result of betting big without [edited] due diligence. Some of it is result of fed priming the economy with free money. With so much money being dropped from the helicopter there's no time for due diligence. You win some you lose some so in that sense it was a rational bet I guess but not an intelligent one.
- bogwog 4y ago
  On the one hand, sure, but on the other hand, this was literally a case of fraud. A fraudulent business is going to go out of its way to hide the fact that it's committing fraud.
  - sam345 4y ago
    I agree that fraud trumps due diligence. You can do your diligence all you want but a fraudster can thing of a million ways to hide the truth, offer up forged/faked documents, etc. But due diligence is just that - you check out at least what is properly due - do they keep books, are they properly audited, do they have a proper board of directors, etc. It's evident Sequoia did none of that. SBF's balance sheet at the time this all thing went down was a spreadsheet that looked like it was made by a kid with no financial training which it was. Their corporate and financial controls were so lacking its insane that anyone gave them money. But Sequoia did and did so with what appears to be no substantive due diligence, other than being swept up by SBF saying exactly what they wanted to hear.
  - hervature 4y ago
    You do know that due diligence involves going over financial records correct? I imagine they didn't look at anything given the sheet SBF was shopping during the collapse.
  - lmm 4y ago
    There's a level of wilful ignorance here. If you "invest" in a business because line goes up and you don't ask why or how, and it turns out the why and how was crime, well, maybe you were just a rube, but maybe you figured out that it wasn't in your interest to ask too many questions. When we're talking about a sophisticated top VC fund...
timack 4y ago
The Sequoia profile of SPF is quite the read: https://archive.ph/qFJJN https://archive.ph/qFJJN
- buildbot 4y ago
  The podcast Behind the Bastards did an episode on SBF, it referenced this article! And made fun if it extensively
justinzollars 4y ago
There was. They marked their entire investments to zero. A total loss.
- majormajor 4y ago
  Are people going to trust them with their money to let them raise future funds? If so: why?
  - dotnet00 4y ago
    People will still trust them with their money because social accountability mechanisms are not that great, PR is a thing and people are even more prone to FOMO and skipping due diligence than even VC investors have been here.
- melony 4y ago
  What about the funds that FTX invested back into Sequoia?
  - justinzollars 4y ago
    Sounds like Sequoia has something to go after.
- flylib 4y ago
  SBF invested 200 million back into Sequoia funds as an LP, wasn't that big of a loss as they invested 214 million into FTX
  - MrPatan 4y ago
    Wasn't it 500 million?
1vuio0pswjnm7 4y ago
The reckoning perhaps is that as rates rise, investors will not need to resort to investing in "tech" companies. The over-availablility of cheap capital was one factor leading to the rise of VC and BS "tech" companies, but the other factor was that rates were so ridiculously low for so long investors were essentially forced to invest in this speculative nonsense.
bitL 4y ago
Sequoia's main driving factor was paranoia of missing the next big thing. Why would that change with one of their assets tanking? They went through similar (albeit at a smaller scale) many times. Most investments flop, this one very publicly. Still, just one of many investments they have, some of them equally foolish. Many "foolish" investments made them rich before.
shadowgovt 4y ago
The same reckoning a VC always gets for making a bad call: the money's gone.
vishnugupta 4y ago
Their money is gone. Their reputation is tarnished among founders and LPs alike for the next 2-3 years. The partners/analysts who were in awe of SBF have become a laughing stock. I'd say VCs have greatly suffered. But then they will brush it under the carpet in the pretext of "that's the risk we are willing to take while chasing 1000x returns" and I guess that's fair. They voted with their money and reputation and lost both.
dehrmann 4y ago
Other than the reputational hit unless they knew about the embezzlement, what would it be? They probably didn't know what was going on, either. They had their ill-timed puff piece a few months back, and they make money on exits. No way FTX would have made it to the public markets once auditors saw it.

humanizersequel 4y ago

>I don’t see how you respect Sequoia’s judgement after this. Me neither, sounds like that's the reckoning.

kjellsbells 4y ago
Helpfully, sequoia list who they are investing in, e.g. https://www.sequoiacap.com/our-companies/?_categories=fintech https://www.sequoiacap.com/our-companies/?_categories=fintec... or https://www.sequoiacap.com/our-companies/?_categories=crypto https://www.sequoiacap.com/our-companies/?_categories=crypto And of course you should all enjoy this while you can: https://www.sequoiacap.com/companies/ftx/ https://www.sequoiacap.com/companies/ftx/
- nradov 4y ago
  It's hilarious how they describe the problem at FTX as a "liquidity crunch”. Liquidity was the least of their issues. What a bunch of clowns.
  - eternalban 4y ago
    Not fair. They ran a "rigorous diligence process" at the time of their investment. https://pbs.twimg.com/media/FhKq6zQUoAIUJ1W https://pbs.twimg.com/media/FhKq6zQUoAIUJ1W These two sources claim Ramnik Arora played a "crucial role": https://diyatvusa.com/2022/11/24/meet-ftx-insider-ramnik-arora/ https://diyatvusa.com/2022/11/24/meet-ftx-insider-ramnik-aro... https://podcasts.apple.com/us/podcast/who-is-ramnik-arora-the-fixer-behind-sam-bankman/id808014240?i=1000587357734 https://podcasts.apple.com/us/podcast/who-is-ramnik-arora-th... There is that Moonstone Bank thingie again: Ramnik was there too: https://www.crunchbase.com/person/ramnik-arora https://www.crunchbase.com/person/ramnik-arora https://www.crunchbase.com/organization/moonstone-bank https://www.crunchbase.com/organization/moonstone-bank Fluent Finance & Moonstone Bank issue "US+ Stable Coin": https://www.globenewswire.com/en/news-release/2022/10/24/2540281/0/en/Fluent-Finance-and-Moonstone-Bank-Accelerate-Crypto-Adoption-by-Issuing-US-Stablecoin.html https://www.globenewswire.com/en/news-release/2022/10/24/254... "Fluent Federation of Member Banks": https://www.fluent.finance/ https://www.fluent.finance/ https://www.fluent.finance/team https://www.fluent.finance/team [includes the "inventor of CBDC" ..] There are so many rabbit holes here. FTX is the tip of something bigger imo.

paulpauper 4y ago

that is why VCs are diversified

joeblubaugh 4y ago
I don’t mean a financial reckoning, I mean a reputational one. Why would you want to do business with such foolish people?
- ipaddr 4y ago
  It is an advantage because taking money from stupid people is preferred
- nkozyra 4y ago
  > Why would you want to do business with such foolish people? On the other hand, I kind of want to pitch something to them now.

jacquesm 4y ago

> I don’t see how you respect Sequoia’s judgement after this. Same for a16z, Softbank and all the others that jumped on the crypto bandwagon without doing their jobs as board members and during the run-up to the deal and after investing. Ironically, the VCs will position themselves as the victims.

coffeebeqn 4y ago
Did anyone respect SoftBank even before this? Their claim to fame was the botched WeWork money hole and a few other insanely overpriced rounds on unscalable/unprofitable(even in theory) businesses.
- jacquesm 4y ago
  It's a mark of something, but not of excellence.
- totalZero 4y ago
  Yes. SoftBank has been extremely effective in the mobile telecommunications investment space. Look up Vodafone KK and their investment in Sprint. SoftBank was SoftBank before its unprofitable/weird investments in businesses like WeWork and Boston Dynamics.
austenallred 4y ago
A16Z didn't invest in FTX
- jacquesm 4y ago
  No, but they've been all over crypto: https://a16zcrypto.com/ https://a16zcrypto.com/
  - deschutes 4y ago
    Let's not forget this gem https://archive.nytimes.com/dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/ https://archive.nytimes.com/dealbook.nytimes.com/2014/01/21/...

deleted 4y ago

[deleted]

sam345 4y ago

I'm just enjoying their humiliation and reputation hit. Enjoying only so much as it is the correct free market result of betting big without [edited] due diligence. Some of it is result of fed priming the economy with free money. With so much money being dropped from the helicopter there's no time for due diligence. You win some you lose some so in that sense it was a rational bet I guess but not an intelligent one.

bogwog 4y ago
On the one hand, sure, but on the other hand, this was literally a case of fraud. A fraudulent business is going to go out of its way to hide the fact that it's committing fraud.
- sam345 4y ago
  I agree that fraud trumps due diligence. You can do your diligence all you want but a fraudster can thing of a million ways to hide the truth, offer up forged/faked documents, etc. But due diligence is just that - you check out at least what is properly due - do they keep books, are they properly audited, do they have a proper board of directors, etc. It's evident Sequoia did none of that. SBF's balance sheet at the time this all thing went down was a spreadsheet that looked like it was made by a kid with no financial training which it was. Their corporate and financial controls were so lacking its insane that anyone gave them money. But Sequoia did and did so with what appears to be no substantive due diligence, other than being swept up by SBF saying exactly what they wanted to hear.
- hervature 4y ago
  You do know that due diligence involves going over financial records correct? I imagine they didn't look at anything given the sheet SBF was shopping during the collapse.
- lmm 4y ago
  There's a level of wilful ignorance here. If you "invest" in a business because line goes up and you don't ask why or how, and it turns out the why and how was crime, well, maybe you were just a rube, but maybe you figured out that it wasn't in your interest to ask too many questions. When we're talking about a sophisticated top VC fund...

timack 4y ago

The Sequoia profile of SPF is quite the read: https://archive.ph/qFJJN https://archive.ph/qFJJN

buildbot 4y ago
The podcast Behind the Bastards did an episode on SBF, it referenced this article! And made fun if it extensively

justinzollars 4y ago

There was. They marked their entire investments to zero. A total loss.

majormajor 4y ago
Are people going to trust them with their money to let them raise future funds? If so: why?
- dotnet00 4y ago
  People will still trust them with their money because social accountability mechanisms are not that great, PR is a thing and people are even more prone to FOMO and skipping due diligence than even VC investors have been here.
melony 4y ago
What about the funds that FTX invested back into Sequoia?
- justinzollars 4y ago
  Sounds like Sequoia has something to go after.
flylib 4y ago
SBF invested 200 million back into Sequoia funds as an LP, wasn't that big of a loss as they invested 214 million into FTX
- MrPatan 4y ago
  Wasn't it 500 million?

1vuio0pswjnm7 4y ago

The reckoning perhaps is that as rates rise, investors will not need to resort to investing in "tech" companies. The over-availablility of cheap capital was one factor leading to the rise of VC and BS "tech" companies, but the other factor was that rates were so ridiculously low for so long investors were essentially forced to invest in this speculative nonsense.

bitL 4y ago

Sequoia's main driving factor was paranoia of missing the next big thing. Why would that change with one of their assets tanking? They went through similar (albeit at a smaller scale) many times. Most investments flop, this one very publicly. Still, just one of many investments they have, some of them equally foolish. Many "foolish" investments made them rich before.

shadowgovt 4y ago

The same reckoning a VC always gets for making a bad call: the money's gone.

vishnugupta 4y ago

Their money is gone. Their reputation is tarnished among founders and LPs alike for the next 2-3 years. The partners/analysts who were in awe of SBF have become a laughing stock. I'd say VCs have greatly suffered. But then they will brush it under the carpet in the pretext of "that's the risk we are willing to take while chasing 1000x returns" and I guess that's fair. They voted with their money and reputation and lost both.

dehrmann 4y ago

Other than the reputational hit unless they knew about the embezzlement, what would it be? They probably didn't know what was going on, either. They had their ill-timed puff piece a few months back, and they make money on exits. No way FTX would have made it to the public markets once auditors saw it.