On February 14th, disgruntled FTX investors filed a lawsuit against the investments firms Thoma Bravo, Paradigm and Sequoia Capital, in a case that lawyers are describing as “tricky”.
Sequoia accused of “touting their own investments”
According to a Bloomberg report, the class action lawsuit claims that the firms gave a veneer of legitimacy to FTX that otherwise wouldn’t have existed, given that Sequoia was reportedly one of the most respected investors in the space before their FTX gaffe.
The lawsuit has accused Sequoia of using their position in the industry to elevate Sam Bankman-Friend, and has mentioned the ways in which they were reportedly boosting the credibility of those that they were invested in with their influence.
When one considers the embarrassing report that they wrote on SBF’s excellence before they decided to invest $200m in FTX (they were impressed despite that he that he was playing League of Legends during a pitch to them), it is fair to say that Sequoia has come out of this entire debacle with a fair degree of egg on their face.
Matt Huang described SBF as “special” and “stunningly ambitious”
One of the claims that was made, for example, was by Matt Huang, the co-founder of Paradigm, who stated that SBF was a “special” founder who was “stunningly ambitious”.
It has since emerged that Paradigm did extraordinarily little due diligence into SBF’s business operations, which has been lamented by those who chose to invest in or deposit funds to FTX – as these people would have now lost all of their funds. The negligence on Paradigm’s part is one aspect of the debacle, but they are not the only ones to blame here.
It remains to be seen if the court case will hold much water, and whether or not the prosecutors who filed the claim will be able to successfully make the case that the “air of legitimacy” that these firms provided for FTX is enough grounds for prosecution.
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