Singapore’s Temasek Holdings has made a noteworthy decision to reduce compensation for both the team that recommended investing in the now-bankrupt FTX cryptocurrency exchange and senior management, demonstrating their collective accountability for the investment failure. In an uncommon move for sovereign funds, which typically keep investment decisions and compensations confidential, Temasek announced these cuts in a statement released on Monday. The decision comes approximately six months after Temasek initiated an internal review of its FTX investment, resulting in a significant writedown of $275 million.
Although there was no misconduct identified within the investment team’s recommendation, Temasek Chairman Lim Boon Heng acknowledged their responsibility for the investment decisions made and emphasized their shared accountability. In a statement posted on Temasek’s website, Lim stated that the compensation reductions were implemented for both the investment team and senior management. However, specific details regarding the extent of the compensation cuts were not disclosed.
Zennon Kapron, the director of Kapronasia, a fintech research and consulting firm based in Singapore, commented on the impact of Temasek’s loss on its reputation, emphasizing the importance of the organization addressing the matter seriously and satisfying shareholders and the market. While Kapron sees the reduction in investment team compensation as a positive step, he believes that further actions may be necessary to restore confidence.
FTX, founded by Sam Bankman-Fried, had experienced significant success as one of the most valuable start-ups in the rapidly expanding global digital currency sector. With a valuation of $32 billion and investments from prominent backers like SoftBank, it seemed poised for continued growth. However, following FTX’s filing for bankruptcy protection in the United States in November, Temasek and other investors, such as SoftBank and Sequoia Capital, marked down their investments to zero.
Temasek had previously disclosed that its investment in FTX accounted for 0.09% of its net portfolio value of S$403 billion ($304 billion) as of March 31, 2022. Additionally, Temasek stated that it had conducted thorough due diligence on FTX, and the audited financial statements indicated the company’s profitability at the time.
Chairman Lim expressed disappointment with the investment outcome and its adverse effects on Temasek’s reputation, attributing the failure to fraudulent conduct perpetrated by FTX and its affiliates, as admitted by key executives and alleged by prosecutors. Nevertheless, Temasek remains committed to delivering sustainable returns over the long term, investing in early-stage companies, and exploring new sectors and emerging technologies to understand their potential impact on existing portfolios and future value in a constantly evolving world.
In conclusion, Temasek’s decision to reduce compensation reflects its acknowledgement of accountability in the failed FTX investment. While the organization aims to regain trust and uphold its reputation, the impact of this action on restoring confidence remains to be seen.
(Conversion rate: $1 = 1.3245 Singapore dollars)