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Singapore's Temasek cuts staff compensation after failed FTX investment

FILE PHOTO: Illustration shows FTX and Temasek logos

By Urvi Manoj Dugar and Yantoultra Ngui

(Reuters) -Singapore's Temasek Holdings said it cut compensation for the team that recommended investing in the now-bankrupt FTX cryptocurrency exchange and for senior management, as they take "collective accountability" for the failed investment.

The cuts were disclosed in a statement on Monday, a rare announcement for sovereign funds whose investment decisions and compensations are not public knowledge. The move comes around six months after Temasek initiated an internal review of its investment in FTX, which resulted in a writedown of $275 million.

"Although 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 made, took collective accountability and had their compensation reduced," Temasek Chairman Lim Boon Heng said in a statement posted on Temasek's website.

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Temasek did not detail the amount of compensation cut.

Zennon Kapron, director of fintech research and consulting firm Kapronasia in Singapore, said the loss suffered by Temasek had dented its reputation and "it had a responsibility to shareholders and the market to demonstrate that it was taking the matter seriously".

"The cut in investment team compensation was a step in the right direction, yet it remains to be seen if 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.

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

Temasek also said last year it had conducted "extensive due diligence" on FTX, with its audited financial statement then "showed it to be 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 United States in November.

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

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

"While there are inherent risks whenever we invest, we believe that we have to invest in new sectors and emerging technologies to understand how these areas may impact the business and financial models of our existing portfolio, and whether they would 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)