Last updated on October 13, 2023
Jesse Powell, the founder of Kraken, has expressed his anger towards venture capital firms who invested in Sam Bankman-Fried’s (SBF) FTX exchange, claiming their incompetence enabled “obvious fraud.” Powell accuses the VCs of failing to perform due diligence and turning a blind eye to possible discrepancies within the troubled firm. He believes they were easily fooled by SBF’s charismatic personality. Powell also highlights their failure to consider the implications of the relationship between FTX and Alameda on the overall operations of the business. The ongoing trial in New York has revealed how SBF ran the bankrupt firm without proper corporate measures to safeguard investors. Testimonies and evidence from former top executives have shocked the crypto community.
Prominent venture capitalists, such as the Ontario Teachers’ Pension Plan, Sequoia Capital, SoftBank, Sino Global Capital, Paradigm, Temasek, SkyBridge, and Multicoin, had provided significant financial backing to FTX. However, it has been revealed that these backers allowed SBF to operate the company with minimal oversight, considering it a relatively secure venture in the volatile cryptocurrency realm. Reports even indicate that SBF conducted video meetings with top venture firm partners while playing video games. Despite claims of thorough due diligence, most investors were forced to write off their investments following FTX’s collapse. This has resulted in a decline in venture capital funding in the cryptocurrency sector, as many firms retreat due to regulatory scrutiny and losses incurred. Furthermore, some of these firms are facing legal actions from FTX users who allege their complicity in the fraud.
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