Ontario Teachers’ Pension Plan to write off huge investment in FTX

by Dan Fournier, published Thursday, Nov. 10, 22:10 EDT on fournier.substack.com

The Ontario Teachers’ Pension Plan, or OTPP, got caught in the crossfire of a feud between rival crypto billionaires, rendering their multi-million-dollar investment in FTX essentially worthless.

Last year, through its Teachers’ Innovation Platform (TIP) arm, the OTPP had participated in a US$420m funding round for FTX Trading Ltd., owner and operator of FTX.COM, a leading global cryptocurrency exchange.

Early this year, they also joined other institutional investors in a US$400 million Series C fundraise, which had increased the valuation of the company to a whopping US$32 billion at the time. Simultaneously, the OTPP invested even more funds into FTX US, the U.S.-based crypto exchange which was then valued at US$8 billion.

Last week, it was revealed that Alameda Research, the trading firm of Sam Bankman-Fried who is the founder of FTX, had somehow leaked their balance sheet which showed that they had understated the value of their FTT token holdings in FTX by at more than US$2b.

This spooked investors who made the connection between the two firms and started pulling their funds off the FTX exchange as well as panic-selling their FTT tokens.

Changpeng Zhao, better known as “CZ”, who is Bankman-Fried’s billionaire rival and CEO of Binance, the largest cryptocurrency exchange in the world, poured more gasoline on the fire when he tweeted that they would liquidate their billion-dollar FTT position off their books.

That was enough to ensure a cascade of FTT token selling which dropped swiftly from nearly US$25 a unit down to its current value of just over US$3.59.

The exact loss as part of the FTX fallout remains unclear. Dan Madge, a spokesperson for OTPP, declined to disclose how large the investment was. “Given the fluid nature of the situation we have no comment right now,” he added.

But a look at their 2021 annual report reveals that its new innovation arm called Teachers’ Venture Growth (TVG), held a C$7.1 billion position comprised of 20 direct investments and partnerships where holdings in FTX Trading Ltd. would figure in its portfolio. Supposing they invested equally in each of these 20 positions, that would amount to a $355m loss for their FTX bet.

And that figure would be separate from its 2022 investment in FTX US.

So, the overall investment loss in FTX would likely figure in the hundreds of millions.

Though investing in crypto ventures is risky and not for the fainthearted, Canadian investment legend Kevin O’Leary had strongly endorsed FTX.

OTPP was equally confident in the trading platform. “In terms of the risk profile, it is probably the lowest risk profile you can have in that it’s everybody else is trading on your platform,” OTPP CEO Jo Taylor stated to Reuters in September.

The Ontario Teachers’ Pension Plan, the third biggest pension fund in Canada, has yet to release a statement on their inevitable FTX write off.  

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Notes:

This article is also published in The Counter Signal.