Ontario Teachers Writes Off FTX Stake, Citing Possible Fraud

(Bloomberg) -- Ontario Teachers’ Pension Plan said it will write down its stake in FTX to zero, taking a $95 million loss barely a year after making its first investment in Sam Bankman-Fried’s now-bankrupt cryptocurrency exchange. 

Teachers said the writedown will have only a “limited impact” because it’s less than 0.05% of the C$242.5 billion ($182 billion) pension fund. “However, we are disappointed with the outcome of this investment, take all losses seriously and will use this experience to further strengthen our approach,” it said in a statement Thursday. 

The Toronto-based pension manager put $75 million into FTX’s international and US divisions in October 2021 through its venture capital arm, known as Teachers’ Venture Growth, and invested $20 million more in FTX.US in January. 

Ontario Teachers said it worked closely with advisers and FTX to understand commercial, regulatory, tax, financial and technical aspects of the business. The fund had a 0.4% stake in FTX International and 0.5% of FTX.US when Bankman-Fried’s empire collapsed last week and filed for Chapter 11.

FTX’s new chief executive officer, John J. Ray III, laid out a shocking list of allegations in a bankruptcy court filing, including misuse of client funds and non-existent oversight by a leadership team that consisted of “a small group of inexperienced, unsophisticated and potentially compromised individuals.”

It was a “complete failure of corporate controls” accompanied by “a complete absence of trustworthy financial information,” Ray said.  

Read more: FTX’s New Boss Reveals Chaos Left Behind by Bankman-Fried

“Recent reports suggest potential fraud conducted at FTX which is deeply concerning for all parties,” Teachers said. “We fully support the efforts of regulators and others to review the risks and causes of failure for this business.” 

It’s the second time in three months that a major Canadian pension manager has been forced to write off completely a crypto investment it only recently made. In August, the Caisse de Depot et Placement du Quebec marked its $150 million stake in Celsius Network LLC to zero after the cryptocurrency lender failed. 

Ontario Teachers launched the venture division in 2019 under the direction of Olivia Steedman, a veteran of the fund who previously had worked in its infrastructure and natural resources unit. Last year, the venture group reported a 39% return on its portfolio, which includes some larger companies such as Elon Musk’s Space Exporation Technologies Corp., better known as SpaceX. 

“As a global, technology-driven innovator in the financial sector, FTX fits well with our mandate,” Steedman said in a news release announcing last October’s $420.69 million investment round, which included Sequoia Capital, Lightspeed Venture Partners and Tiger Global Management. Sequoia wrote down its $214 million investment in FTX last week. 

(Updates with additional information on bankruptcy court filing and Teachers’ venture investments.)

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.