FTX investors file class-action suit against Sequoia
According to reports, users of the now-defunct cryptocurrency exchange FTX have taken aim at financiers who marketed the platform, arguing that their efforts provided a "air of legitimacy" to the now-defunct exchange in a situation that has been described as "tricky" by a cryptocurrency attorney.
According to a story that was published by Bloomberg on February 15th, FTX investors had filed a class-action lawsuit on February 14th against the venture capital company Sequoia Capital as well as the private equity companies Thoma Bravo and Paradigm.
The investors said that the companies were promoting "their own investments" in FTX, which amounted to hundreds of millions of dollars.
It was stated that the companies participated in a promotional marketing campaign in 2021, which the investors said gave the discredited cryptocurrency exchange a "air of credibility."
The three companies were all investors in FTX's $900 million Series B round, which took place in July 2021. This was the biggest raise in the history of cryptocurrency, and individual partners at each of the three companies spoke favorably of former FTX CEO Sam Bankman-Fried at the event.
Matt Huang, one of the co-founders of Paradigm, issued a statement in the wake of the fundraising announcement in July 2021, in which he referred to Bankman-Fried as a "unique" entrepreneur who is "stunningly ambitious."
He went on to say that despite the fact that Sequoia did not do its due diligence to a particularly high standard, the company is not "liable to others."
The fact that there is no evidence to imply that Sequoia wasn't "playing within the regulatory guidelines" led Hennessy to assume that it was a matter of "buyer beware."
According to a separate report published by Bloomberg on February 15, it was revealed that in the same court filing, Sam Bankman-Fried and his father, along with former executives of FTX and Alameda Research named Caroline Ellison, Nishad Singh, and Gary Wang, were all served with a subpoena, which is an order compelling a person to appear in court in order to provide additional evidence.
It was said that Sam Bankman-Fried is likely to show up in court on February 17, while Joseph Bankman, Ellison, Wang, and Singh are scheduled to appear in court on February 16.