By: Eva Baxter
Global crypto venture investments have declined 63% in Q3, marking the lowest level since 2020, attributable to the ongoing legal issues surrounding FTX. This sharp decrease signifies a lack of appetite among venture capitalists, who have been the main drivers of the crypto industry. FTX co-founder, Sam Bankman-Fried, embroiled in allegations of mismanagement of the exchange, has caused a loss of confidence in the sector. In light of the FTX scandal, many VCs have now retreated, as it continues to negatively impact their association with the platform.
Prominent VCs like Sequoia Capital, despite having made substantial investments in the FTX and its trading division Alameda Research, are now facing significant write-offs due to the legal challenges that FTX faces. As the bankruptcy proceedings for FTX and Alameda continue, their equity stakes in various startups have become pivotal. However, the prospect of a liquidation sale could further depress the valuations of crypto startups.
Despite the tumultuous scenario, some silver lining might emerge for FTX’s creditors in the prospect of recouping losses through potential equity sales. The global crypto investment community is warily watching the developments surrounding the FTX saga and its potential implications on the industry's future.
The FTX fraud trial is due to enter its second week with testimonies expected from key insider witnesses. The crypto industry is advised to focus on legislation enabling a secure investing environment and avoid any distracting scandals.
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