Singapore’s Temasek Holdings said it cut pay for the team that suggested investing in the now-bankrupt FTX cryptocurrency exchange and for senior management because they take “collective responsibility” for the bad investment. The cuts were announced in a statement on Monday. This is unusual for sovereign funds, which usually keep their investment decisions and compensations secret. About six months ago, Temasek started an internal review of its investment in FTX, which led to a $275 million write-down.
“There was no wrongdoing by the investment team in coming up with their investment recommendation, but the investment team and senior management, who are ultimately responsible for investment decisions, took collective responsibility and had their pay cut,” Temasek Chairman Lim Boon Heng said in a statement posted on Temasek’s website.
Temasek did not say how much compensation would be cut. Zennon Kapron, who runs a research and consulting firm in Singapore called Kapronasia, said that Temasek’s loss had hurt its reputation and that the company “had a duty to shareholders and the market to show that it was taking the matter seriously.” “Cutting the pay of the investment team was a step in the right direction, but we still don’t know if it will be enough to restore trust,” Kapron said.
Sam Bankman-Fried started FTX, which was once one of the most valuable start-ups in the fast-growing digital currency sector around the world. It was worth $32 billion last year after investors, including SoftBank, gave it $400 million. Temasek said that the cost of investing in FTX was 0.09 percent of the net value of its portfolio, which was S$403 billion ($304 billion) as of March 31, 2022, and that it had no direct exposure to cryptocurrencies at the time.
Temasek also said last year that it had done “extensive due diligence” on FTX and that its audited financial statement “showed it to be profitable.” After FTX filed for bankruptcy in the US in November, its other investors, like SoftBank and Sequoia Capital, also wrote down their investments to zero.
“With FTX, as prosecutors have said and as key executives at FTX and its affiliates have admitted, there was fraudulent behavior that was hidden from investors, including Temasek,” Lim said in the statement on Monday. “However, we are disappointed with how our investment turned out and how it hurt our reputation.”
Lim said that by investing in companies in their early stages, Temasek hopes to get long-term returns that are stable. “There are always risks when we invest, but we think we need to invest in new sectors and new technologies to learn how they might affect the business and financial models of our existing portfolio and if they could be future drivers of value in a world that is always changing,” Lim said.