Singapore’s Temasek opens review into ill-fated FTX investment

Singapore’s Temasek has launched a review of its $275mn investment in FTX as the state-owned investment fund is scrutinised over the due diligence it performed before backing Sam Bankman-Fried’s crypto exchange.

Lawrence Wong, Singapore’s deputy prime minister, told parliament on Wednesday that Temasek’s losses were “disappointing” and had caused reputational damage for the city-state.

Temasek earlier this month wrote off its investment in FTX, which constituted 0.09 per cent of its S$403bn (US$295bn) portfolio but provided the crypto group with a seal of approval from a major fund manager. In response to queries by the Financial Times, the fund had defended its “eight-month due diligence” process but earlier this month admitted its trust in former chief executive Bankman-Fried appeared “misplaced”.

Temasek’s inquiry comes as filings by FTX’s new management in US bankruptcy court point to a severe lack of financial controls at a group that was once valued at $32bn by a roster of big-name investors that also includes venture capital firm Sequoia and Japan’s SoftBank.

Confidence in Singapore’s ability to regulate the digital assets industry has been undermined by a series of crypto failures connected to the city-state this year, including the collapse of hedge fund Three Arrows Capital and crypto platform Hodlnaut. Singaporean police said last week it was investigating the platform and its directors “for possible cheating and fraud offences”.

The city-state’s sovereign wealth fund GIC is also facing pressure as an investor of crypto broker Genesis. Genesis said following FTX’s collapse earlier this month that it had about $175mn in funds locked in an account on the platform. Several days later, Genesis paused withdrawals at its lending unit citing “unprecedented market turmoil”.

The fallout over FTX and the losses incurred by retail investors have resulted in unusual public criticism of Temasek, with many questioning its due diligence. Singapore users accounted for the second-largest share of web traffic to FTX.com, accounting for about 5 per cent of traffic share, according to data from CoinGecko.

“It was a moonshot investment, but Temasek looks silly for pushing the line they did eight months of due diligence. They should have just said we took a punt, it didn’t work out, and we are sorry,” said one major investor in the private equity space.

In a Facebook post on Saturday, Ho Ching, the former Temasek chief executive who is the wife of Singapore’s leader Lee Hsien Loong, called fund’s loss “egg on our face”. But she defended the investor’s overall strategy, saying “some of Temasek’s best investments were made by being contrarian”.

Wong, who also serves as Singapore’s finance minister, said on Wednesday in response to questions from members of parliament that FTX’s collapse would have a limited impact on the city-state’s broader financial system.