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Temasek’s CIO Rohit Sipahimalani pauses investments in crypto in contrast to Ho Ching’s contrarian stance amid FTX loss

In an interview with CNBC on Tuesday (11 Jul), Temasek’s Chief Investment Officer Rohit Sipahimalani now said Temasek is not currently looking to invest in crypto companies.

“There’s a lot of regulatory uncertainty in this environment. And I do think that be very difficult for us to make another investment and exchange in the middle of all this regulatory uncertainty,” Sipahimalani said.

“If you have the right regulatory framework, and we are comfortable with it, and you have the right investment opportunity, there’s no reason for us to not to look at it,” Sipahimalani added.

“But as I said, at this point in time, we would not be comfortable investing in exchanges given the way things are right now.”

He added that Temasek never intended to invest in cryptocurrency. “We’ve never been looking to invest in cryptocurrencies. Even the investment in FTX, we’ll be talking about investing in an exchange, which allowed us to get fee-based revenue without thinking [of] balance sheet risk or any trading risks,” said Sipahimalani.

FTX fails big time

Temasek was, in fact, one of the enthusiastic investors of crypto exchange FTX. But in November last year, it had to write down its entire US$275 million investment in FTX to zero. FTX also went bankrupt that same month. The company had more than 100,000 creditors, as well as liabilities between $10 billion and $50 billion, according to its bankruptcy filing.

“We recognize investments at that level is binary and risky, and therefore we rely on diversification. We cap early-stage investments at 6% of our portfolio,” Sipahimalani defended Temasek’s decision to have invested in FTX.

Temasek did the necessary due diligence, Sipahimalani said, and ultimately went ahead because FTX “had good technology was gaining market share, and showed a willingness to engage with regulators and be licensed.”

But ultimately, it is “very difficult to always uncover that due diligence,” he said. “When we do early stage investing, that there will be some losses, some write-offs, but, importantly for us, the whole portfolio of early stage investments should do well.”

According to his LinkedIn, Sipahimalani graduated from St. Stephen’s College in Delhi. He later obtained an MBA from Indian Institute of Management, Ahmedabad, India. He worked in Citibank in India before joining Morgan Stanley in Singapore. Thereafter, he joined Temasek.

Temasek was still optimistic about crypto investments last July

Temasek was actually very positive about its crypto investments a year ago.

Mr Anthony Lewis, Director of Crypto & blockchain venture building & investing in Temasek, said at a forum on 19 July last year that it has invested directly into “single names”.

“So the ones that we’ve disclosed FTX and FTX US and Immutable from Australia, Consensus and Amber. So we continue to invest in single names, we continue to invest in funds through the cycle,” said Mr Lewis.

He added, “In fact, there’s never been more activity. We are pretty active now. The team is scaled up. We have the investing team. We also work with other teams in the organisation.”

Four months later, FTX imploded. When FTX went bankrupt, Temasek blamed misplaced belief in the FTX founder.

Later, Mdm Ho Ching, wife of Singapore’s Prime Minister Lee Hsien Loong, broke her silence over the US$275 million write-off in a Facebook post, saying, “And Temasek can afford to be contrarian bcos it has its own balance sheet and can think long term.”

Mdm Ho, however, did not clarify in her Facebook post if she had oversight over the investment into FTX.

While Temasek claims that its US$275 million investment was made across 2 funding rounds from October 2021 to January 2022, FTX itself said in a press statement that Temasek had participated in the previously announced Series B in July 2021 along with the Series B-1 fundraiser held in October 2021.

If what FTX said was true, then Mdm Ho Ching would have overseen the initial investment into FTX before she stepped out of her CEO position in October 2021—a position she held since January 2004.

Social media vibes surrounding the controversy of Temasek’s bad investment in FTX would later force Deputy Prime Minister Lawrence Wong to announce in Parliament that Temasek would initiate an internal review over the FTX fiasco. But it would be conducted by Temasek’s own staff.

In any case, for the financial year ending 2023, Temasek has reported its worst returns since 2016. The net value of its portfolio had shrunk to S$382 billion from the previous year’s S$403 billion. It made a loss of S$7 billion.

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