Saturday, November 19, 2022

Temasek should immediately cease all crypto investments

From their latest Statement on FTX (Temasek), it is clear that Temasek believes it did no wrong, hasn't learned the $275M lesson bought with public money, and continues to view the crypto space favorably.

Here are some tidbits:

The nascency of the blockchain and digital asset industry presents innumerable opportunities as well as significant risks.

Nascency? 15 years of cryptocurrency and the only uses are speculation, money laundering, scamming, grifting, and financing criminal activities.

As an investor-owner seeking sustainable returns over the long term, we believe that we have to invest in new sectors and emerging, nascent business models to understand the applications and impact they may have on the business and financial models of our existing portfolio, or be drivers for future value in an ever-changing world. This is why we invest in early stage companies and accept the binary risks associated with such investments.

Conflating cryptocurrency and related companies with actual technologies and businesses.

Similar to all investments, we conducted an extensive due diligence process on FTX, which took approximately 8 months from February to October 2021. During this time, we reviewed FTX’s audited financial statement, which showed it to be profitable.

Spoiler: FTX's auditors are crypto cheerleaders: Prager Metis and Armanino. WTF has heard of them?

They are small time outfits with poor track records with the Public Company Accounting Oversight Board (PCAOB). These two firms in their 2021 reports, did not provide an opinion on the FTX US or FTX Trading internal controls over accounting and financial reporting. Because there were none (..) More here

“Never in my career have I seen such a complete failure of corporate controls" - FTX liquidator.

We recognise that while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks.

Cannot eliminate risk that FTX was a scam, even though they had no proper employee records, headquartered in the Bahamas with an org structure resembling other scams, had no cash management system, numerous complex related party transactions, no boards and board meetings, no proper record keeping of decision-making, etc.

It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced.

Defends its DD process while saying it's because it mistrusted SBF. So nothing wrong with the DD yeah? Next time just learn to trust founders better. Is that the lesson here Temasek?

Going Forward (..) We continue to recognise the potential of blockchain applications and decentralised technologies to transform sectors and create a more connected world. But recent events have demonstrated what we have identified previously – the nascency of the blockchain and crypto industry and the innumerable opportunities as well as significant risks involved.

Hasn't learned the $275M lesson. Believes cypto space has innumerable opportunities.

There are two failings here: (1) investing in the crypto space and continuing to view the space favorably after the implosion of so many actors, and (2) performing very poor DD. This is a $275M hole that could have been easily avoided. Given the amount involved, shouldn't the public deserve a proper accounting/investigation into what happened rather than this ill-made statement?

Their latest statement is alarming to me. And this is not the first time the government has been wrong about an entire industry. Anyone remember the gov's big push into biomedical sciences 15-20 years ago? Right now, they are saying no to retail speculation, yes to digital assets. But they are just splitting hairs at this stage. https://www.mas.gov.sg/news/speeches/2022/yes-to-digital-asset-innovation-no-to-cryptocurrency-speculation.

EDIT: Some might say it is understandable that Temasek got caught up in the bubble last year, but the important point here is that it still believes in this space, even though it has been revealed to be nothing more than a cesspit of speculation and criminal activity after so many years (15 years since the invention of bitcoin).


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