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Eighteen prominent venture capital (VC) investment firms, including Temasek, Sequoia Capital, Sino Global, and Softbank, are now defendants in a class-action lawsuit that has been lodged in the United States District Court for the Northern District of California. 
This lawsuit is connected to their involvement with the defunct cryptocurrency exchange FTX, which has gone bankrupt. 
Filed on August 7th, the lawsuit alleges that these investment firms played a role in “aiding and abetting” the fraudulent activities linked to FTX. 
The suit asserts that these entities utilized their significant influence, power, and substantial resources to facilitate the rapid expansion of FTX’s fraudulent practices, which led to its eventual multibillion-dollar collapse. 
The lawsuit contends that FTX, the cryptocurrency exchange, violated multiple securities laws and engaged in misappropriation of customer funds. 
Simultaneously, the venture capital firms in question portrayed an inaccurate image of the exchange, asserting that they had diligently conducted their assessments. 
As a result, the lawsuit claims that these VC firms were directly involved in the “perpetration, conspiracy, and aiding and abetting” of FTX Group’s substantial fraudulent activities, all for their personal financial gain. 
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In the lawsuit’s discussion of the VC firms’ role in facilitating FTX’s fraudulent practices, the plaintiffs highlight Temasek’s involvement and its statements regarding the financial status of FTX. 
Temasek maintained that it underwent an extensive eight-month review of FTX’s financial records, audits, and regulatory compliance, finding no concerning indications. The lawsuit reads: 
“The multinational VC defendants also propagated numerous false and deceptive statements about FTX’s operations, finances, business, and future prospects to entice customers into investing, trading, and depositing assets with FTX.” 
The lawsuit further alleges that these VC firms endorsed FTX’s stability and safety, showcasing the exchange’s purported efforts to attain proper regulation. 
One of FTX’s initial investors was Temasek, which invested $275 million. 
However, following the cryptocurrency exchange’s collapse in November 2022, Temasek completely wrote off its investment and even reduced compensation for the executives responsible for the FTX investment. 
Singapore-based Temasek’s involvement also casts a spotlight on the Singaporean government’s lack of oversight. 
FTX’s downfall had a domino effect within the cryptocurrency industry, triggering doubts about the entire crypto ecosystem and leading to a prolonged dearth of institutional crypto investments for several months. 
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Top VC Firms Face Class-Action Lawsuit for Alleged Role in FTX Crypto Exchange Fraud

Crypto Intelligence

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