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Temasek Not Looking for Crypto Investments After FTX Blunder

Temasek's multi-billion losses, Cboe's Coinbase agreement, Hong Kong's OTC crypto stores, Multichain's inside job, and the first-ever criminal case surrounding a smart contract on a decentralized exchange

July 12, 2023

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Singapore's sovereign wealth fund Temasek is unsurprisingly not touching crypto investments, at least for the time being.

When FTX collapsed last year, Temasek was forced to write down its US$275 million investment (amounting to 0.09% of its US$403 billion portfolio) as the third-largest investor in the exchange.

Describing the FTX investment as “an aberration” in early-stage investments, Temasek chief investment officer, Rohit Sipahimalani, has now said the fund will not touch crypto companies.

“There’s a lot of regulatory uncertainty in this environment. And I do think that be very difficult for us to make another investment and exchange in the middle of all this regulatory uncertainty,” Sipahimalani said.

He added that even when investing in FTX, Temasek had no intention to park money in crypto. “We’ve never been looking to invest in cryptocurrencies. Even the investment in FTX, we’ll be talking about investing in an exchange, which allowed us to get fee-based revenue without thinking [of] balance sheet risk or any trading risks,” he said.

Temasek’s FTX Debacle: Lessons Learned or Merely Lip Service?
While it is commendable that Temasek is taking some form of accountability for the failed investment, the lack of transparency surrounding this decision raises significant questions about due diligence, risk assessment, and the overall management of investments in the crypto space.

“Firstly, you got to remember that the FTX investment was a part of our early-stage investment strategy, where we invest in new disruptive technologies to see what’s around the corner so that we can bring that to our portfolio companies and benefit within our ecosystem."

"Secondly, we’re looking, obviously, for returns to these early-stage companies, but probably most importantly, we’re looking to find the next winners that we can double down on, as they break out. And many of them become ultimately a core part of our portfolio.”

Temasek Holdings also reported a 5.2% decrease in net portfolio value to S$382 billion in the financial year 2023 compared to S$403 billion in the previous year. The company experienced a loss of S$7.3 billion compared to the S$10.6 billion net profit reported the previous year, primarily attributed to changes in accounting standards, including mark-to-market gains and losses. Temasek would have otherwise posted a profit of S$14.7 billion but the fund instead reported its first loss since the new accounting standards were implemented in 2018.

Elsewhere:

  • Cboe has reached an agreement with Coinbase to enter into surveillance-sharing agreements. The agreement came to light in Cboe's filed amendments for five proposed spot bitcoin exchange-traded funds (ETFs): Wise Origin Bitcoin Trust, WisdomTree Bitcoin Trust, VanEck Bitcoin Trust, Invesco Galaxy Bitcoin ETF, and ARK 21Shares Bitcoin ETF. BlackRock and Fidelity, have also listed Coinbase as a surveillance-sharing partner.
  • U.S. attorney Damian Williams has announced the first-ever criminal case involving an attack on a smart contract operated by a decentralized cryptocurrency exchange. Former senior security engineer Shakeeb Ahmed has been charged with wire fraud and money laundering in connection with an attack on a decentralized cryptocurrency exchange. Ahmed allegedly defrauded the exchange and stole around $9 million in cryptocurrency. He then laundered the stolen funds through complex transfers on the blockchain, involving swapping cryptocurrencies and using overseas crypto exchanges. Ahmend exploited a vulnerability in the exchange's smart contract and generated inflated fees.
  • Mox Bank, a Chinese online-only bank, has frozen the accounts of customers due to their involvement in cryptocurrency transactions. The bank cited "security considerations" as the reason for blocking the accounts. Although the accounts were unblocked after a few days, customers faced difficulties in reaching out to the bank as Mox Bank is an online-only bank with no physical branches. Some customers are considering filing complaints with the Hong Kong Monetary Authority (HKMA). Hong Kong's over-the-counter (OTC) crypto stores are also proving popular with mainland Chinese customers. These stores cater for those who seek to purchase digital assets with cash, often without disclosing the origin of the money or their identity and operate with lighter regulatory checks compared to online exchanges. Most OTC stores remain outside the purview of regulatory authorities.
  • Chainalysis believes that the multimillion-dollar exploit of cross-chain bridge protocol Multichain may have been an internal rug pull. In a recent blog post, Chainalysis suggests that compromised administrator keys could have been used in the exploit, leading to suspicions of an "inside job", which led to over $125 million in losses. The disappearance of Multichain's CEO, known as “Zhaojun,” in late May also supports this. Multichain's smart contracts use a multiparty computation (MPC) system, similar to a multi-signature wallet.

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