By Ketki Saxena
Investing.com -- Canada’s third-largest pension fund, Ontario Teachers’ Pension Plan will write down its stake in FTX to zero by year-end, amounting to a US$95 million loss.
The writedown comes less than a year after making its first investment in the now-bankrupt cryptocurrency exchange, and just months after OTTP’s CEO reinforced his belief in FTX despite crypto turmoil.
The write-down is worth less than 0.05% of the $242.5 billion (US$182 billion) pension fund.
Ontario Teacher’s invested US$75 million into FTX’s international and U.S. divisions in October 2021 through its venture capital arm, and invested US$20 million more in FTX.US in January. At the time of FTX’s bankruptcy filing last week, the pension fund had a 0.4% stake in FTX International and 0.5% in FTX.US.
As recently as September, Ontario Teachers has maintained its confidence in FTX, defending its investment as “certainly the lowest risk profile you can have”, in an interview to Reuters at the time.
The scale of corporate control failure and absence of adequate regulatory oversight now undoubtedly raises questions of due diligence conducted by institutional investors in FTX.
Dan Madge, spokesperson for Ontario Teacher’s Pension Plan said in a statement to The Globe and Mail, said the fund undertakes“robust due diligence on all private investments,”
“In FTX’s case, our underwriting process included working closely with third-party advisors and FTX to explore commercial, regulatory, tax, financial, technical and other matters,” Mr. Madge noted.
John Ray, the restructuring expert who has now taken over as chief executive officer of FTX, and whose career included the cleanup of the Enron fallout, raises serious concerns about the state of FTX finances. Mr. Ray states that “never in his 40-year career seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information.”
In an FTX filing in U.S. bankruptcy court, Mr Ray. stated, “From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
The fund is not the only Canadian pension investment firm that has recently suffered losses in crypto company collapses.
The Caisse de dépôt et placement du Québec contributed $150 million to Celsius’ $400 million USD funding round last year, and held a 4% equity share in Celsius.