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Sequoia Capital reduces its FTX investment to $0

A pile of Bitcoins is shown here after software engineer Mike Caldwell minted them in his shop in Sandy, Utah.

George Frey | Getty Images

Venture capital firm Sequoia Capital said it will mark down to zero its more than $210 million investment in cryptocurrency exchange FTX, as the possibility of bankruptcy.

“In recent days, a liquidity crisis has created solvency risk for FTX,”[ads1]; Sequoia said in a note to investors posted on Twitter.

“Based on our current understanding, we are marking our investment down to $0,” the Silicon Valley-based firm said Wednesday.

“The full nature and extent of this risk is not known at this time,” Sequoia said, adding that it is monitoring the rapidly evolving situation.

FTX, owned by 30-year-old entrepreneur Sam Bankman-Fried, was valued at $32 billion earlier this year.

Sequoia’s announcement comes as rival exchange Binance’s CEO Changpeng Zhao pulled out of a proposed deal to buy FTX, leaving the beleaguered firm at risk of a liquidity crisis.

Also on Wednesday, the US Department of Justice and the Securities and Exchange Commission launched investigations into the sudden implosion of the crypto trading platform.

FTX’s native token FTT was down nearly 30% to trade at $2.21 on Thursday. The broader cryptocurrency market has also taken a beating, with bitcoin hitting a new low for the year earlier this week.

Read more about technology and crypto from CNBC Pro

Sequoia emphasized that its exposure to FTX was limited and that it invested $150 million in and through Global Growth Fund III.

“FTX is not a top ten position in the fund,” the company said, adding that it makes up less than 3% of total capital in the fund.

“The fund remains in good shape,” the note said, elaborating on how the losses due to the exposure to FTX are offset by a greater capital flow of “realized and unrealized gains in the same fund.”

“We are about to take risks,” Sequoia said in its note. “Some investments will surprise to the upside, and some will surprise to the downside.”

‘Wild Wild West’

Sequoia Capital reduces its FTX investment to alt=

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