FTX Collapse Puts Singapore Government Under Close Scrutiny

The due diligence performed by state-owned investor Temasek Holdings and the losses suffered by FTX investors led to a serious parliamentary investigation for Singaporean Prime Minister Lee Hsien Loong and Deputy Prime Minister Lawrence Wong. 

The opposition Workers’ Party is said to have filed more than a dozen inquiries regarding Temasek’s investment, casting doubt on the city-state of Singapore’s ability to track losses incurred by retail investors reliably and the city-position state’s on cryptocurrency investments in general. Additionally, concerns were raised about the steps taken or the due research done before investing in platforms like FTX.

Leong Mun Wai, a representative of the opposition Progress Singapore Party, has also requested information about how the Ministry of Finance intends to explore adding further rules to the investment mandate of Singapore’s sovereign funds. The most recent development comes after Temasek stated that it wrote down its entire stake in the defunct cryptocurrency exchange, “irrespective of the outcome” of its bankruptcy protection application. Temasek made that statement more than a week ago.

According to reports, Temasek, a company owned by the Singaporean government, invested $210 million in FTX International, giving it a 1% minority share. Another $65 million was invested for a 1.5% minority ownership in the cryptocurrency exchange’s US subsidiary over two investment rounds from October 2021 to January 2022. The overall cost of its investment was 0.09 percent of its $293 billion net portfolio value.

The company has previously stated that their due diligence procedure for FTX took around eight months, from February to October 2021, and involved thoroughly examining the exchange’s audited financial statement, demonstrating its profitability. Temasek was granted “appropriate confirmations that were contractually binding” after examining the connection, treatment advantage, and split between contentious trading business Alameda and FTX. However, Temasek declared after the collapse:

“It is apparent from this investment that perhaps our belief in the actions, judgment, and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced.”

Ho Ching, Temasek’s previous chief executive, defended the company’s investing approach by noting that some of the company’s major investments were made “by being a contrarian.” She admitted that the pain was felt by the Singapore state investment corporation, which had to write off its entire stake. She continued by saying that failing to monitor a firm that may turn out to be poorly run would be like losing face.

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