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Singapore’s Temasek cuts employee compensation after failed FTX investment

  • No misconduct by Temasek’s investment team
  • The team, senior management took “collective responsibility”
  • Temasek did not detail the amount of the compensation cut

May 29 (Reuters) – Singapore’s Temasek Holdings ( TEM.UL ) said it cut compensation for the team that recommended investing in now-bankrupt FTX cryptocurrency exchange and for senior management, as they take “collective responsibility” for the failed investment.

The cuts were revealed in a statement on Monday, a rare announcement for sovereign wealth funds whose investment decisions and compensation are not publicly known. The move comes about six months after Temasek began an internal review of its investment in FTX, which resulted in a $275 million write-down.

“While there was no misconduct by the investment team in reaching their investment recommendation, the investment team and senior management, who are ultimately responsible for investment decisions, took collective responsibility and had their compensation reduced,” Temasek chairman Lim Boon Heng said in a statement posted on Temasek’s website.

Temasek did not detail the amount of the compensation cut.

Zennon Kapron, director of fintech research and consultancy Kapronasia in Singapore, said the loss Temasek suffered had tarnished its reputation and “it had a responsibility to shareholders and the market to demonstrate that they took the matter seriously”.

“The cut in the investment team’s compensation was a step in the right direction, but it remains to be seen whether it will be enough to restore confidence,” Kapron added.

FTX, founded by Sam Bankman-Fried, was once one of the most valuable start-ups in the fast-growing digital currency sector globally, reaching a valuation of $32 billion last year after raising $400 million from investors including SoftBank (9984 .T) .

Temasek had said the cost of investment in FTX was 0.09% of its net portfolio value of S$403 billion ($304 billion) as at March 31, 2022, and that it currently had no direct exposure to cryptocurrencies.

Temasek also said last year that it had carried out “extensive due diligence” on FTX, with its audited financial report subsequently “showing that it was profitable”.

FTX’s other backers such as SoftBank and Sequoia Capital had also marked down their investment to zero after FTX filed for bankruptcy protection in the US in November.

“With FTX, as alleged by the prosecution and admitted by key executives of FTX and its affiliates, there was fraudulent conduct intentionally concealed from investors, including Temasek,” Lim said in the statement on Monday. “However, we are disappointed with the outcome of our investment, and the negative impact on our reputation.”

Temasek seeks to deliver long-term sustainable returns by investing in early-stage companies, Lim said.

“While there are inherent risks when we invest, we believe we need to invest in new sectors and new technologies to understand how these areas can impact the business and financial models of our existing portfolio and whether they will be drivers of future value in an ever-changing world,” Lim added.

($1 = 1.3245 Singapore dollars)

Reporting by Urvi Dugar in Bengaluru and Yantoultra Ngui in Singapore; Additional reporting by Xinghui Kok in Singapore; Editing by Lincoln Feast and Jacqueline Wong

Our standards: Thomson Reuters Trust Principles.

Yantoultra Ngui

Thomson Reuters

Yantoultra Ngui is a Southeast Asia deals correspondent with Reuters in Singapore, covering M&A and capital markets deals in a region that is fast emerging as a popular destination for startup investors, unicorns and IPOs. He has previously been a reporter for Bloomberg and The Wall Street Journal. In particular, he was part of the WSJ’s team that covered the financial scandal at the Malaysian sovereign wealth fund 1MDB. Yantoultra graduated with an MBA in Finance from Universiti Putra Malaysia in 2010.

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