Temasek has said that it will be cutting the compensation of its senior management and investment teams who were involved in its failed investment in cryptocurrency company FTX as it takes responsibility for the "negative impact on [its] reputation, according to a statement by chairman Lim Boon Heng.
In his statement, Lim noted that an independent team conducted an internal review of the investment and that the findings were directly presented to the board risk and sustainability committee and to Temasek's board.
"Although there was no misconduct by the investment team in reaching their investment recommendation, the investment team and senior management, who are ultimately responsible for investment decisions made, took collective accountability and had their compensation reduced," Lim said.
He added that with FTX, as alleged by prosecutors and as admitted by key executives at FTX and its affiliates, there was fraudulent conduct intentionally hidden from investors, including Temasek.
Nevertheless, we are disappointed with the outcome of our investment, and the negative impact on our reputation.
The statement comes after FTX collapsed in November last year after a liquidity crisis prompted regulators to intervene globally.
Temasek has invested US$210 million in FTX International and US$65 million in FTX US across two funding rounds from October 2021 to January 2022. This represented 0.09 per cent of Temasek’s net portfolio value of $403 billion as of March 31, 2022, according to The Straits Times.
In 2022, questions were raised in parliament about the FTX investment and Deputy Prime Minister Lawrence Wong then noted that the loss of the investment did not mean Temasek’s governance system was not working, and no amount of due diligence and monitoring could eliminate the risks altogether. He also revealed that Temasek has begun its own internal review by an independent team.
"It is disappointing when there is a loss by our investment entities, as in the case of Temasek’s investment in FTX. Even more so, because the loss arose from what turned out to be a very badly managed company and from possible fraud and mishandling of customer funds. The fact that other leading global institutional investors like BlackRock and Sequoia Capital also invested in FTX does not mitigate this," Wong said at the time.
He added at that point in time that he was confident that the Temasek Board and management team will learn and improve from this experience. "At the same time, we should see this FTX loss in the broader context of Temasek’s performance in early-stage investments. After writing-off the FTX investment, Temasek’s early-stage portfolio as at March this year has generated an internal rate of return in the mid-teens over the last decade, better than industry averages," he said.
Temasek will reportedly continue to not invest in cryptocurrencies and will also take extra precautions when it comes to considering new investments in the blockchain space.
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