Camelot owners facing $95m hit from FTX collapse
Ontario Teachers’ Pension Plan defends investment as embattled cryptocurrency exchange fights to survive
UK National Lottery operator Camelot’s owners, the Ontario Teachers’ Pension Plan (OTPP) has admitted it could lose as much as $95m from an investment made into cryptocurrency exchange FTX.
The pension fund, Canada’s third largest, made an initial investment of $75m into FTX International and its US subsidiary FTX.US in October 2021, later making a follow-on investment of $20m into the FTX.US business in January 2022.
The investment was made via its Teachers’ Venture Growth (TVG) platform, which the OTPP has said was to gain “small-scale exposure” to an emerging area of the financial technology sector.
In a statement, the OTPP defended the investment strategy deployed, suggesting that any potential loss arising from the collapse of FTX would only be small in comparison to the overall fund exposure.
“TVG’s investments are structured to provide Ontario Teachers’ with returns commensurate with the risk undertaken and to provide proprietary insights that inform investing elsewhere across the Plan,” the OTPP said.
“Naturally, not all of the investments in this early-stage asset class perform to expectations. However, since inception, TVG has delivered solidly on intended objectives.
“While there is uncertainty about the future of FTX, any financial loss on this investment will have limited impact on the Plan, given this investment represents less than 0.05% of our total net assets,” the OTPP added.
The OTPP had total net assets under management valued at $242.5bn as at June 30, 2022.
It has owned UK National Lottery operator Camelot since March 2010, when it beat off competition from other bidders to buy the firm for $400m. Camelot is set to lose the franchise to run the National Lottery when Allwyn takes over in 2024.
The OTPP’s revelation comes as the cryptocurrency world and the financial world rock from the whirlwind collapse of FTX, which has reportedly become the subject of a Securities and Exchange Commission investigation in the US.
Founded in May 2019 by former Wall Street trader Sam Bankman-Fried and ex-Google employee Gary Wang, FTX enjoyed a stellar rise and an equally high-profile collapse, with the latter coming in the space of just two weeks.
FTX attempted to buy the US division of operator PlayUp for $450m, but ultimately chose not to do so after allegedly being put off the deal by PlayUp USA’s former CEO Dr Laila Mintas. The actions of Mintas are currently the subject of a court case in Nevada, which has yet to be resolved.
The first signs of trouble at FTX came on November 6, when rival cryptocurrency operator Binance announced it would liquidate its multi-billion-dollar investment in FTX’s flagship token, FTT, after it had heard revelations concerning FTX’s balance sheet.
On November 7, Bankman-Fried issued a statement dismissing the claims made by Binance as “false rumours”, however the following day the FTT token collapsed by 72% as FTX customers besieged the site with withdrawal requests.
Binance this week U-turned on a non-binding agreement to bail out FTX, with a red banner on the company’s website suggesting it was unable to process withdrawals and added that the company would “strongly advise against depositing”.
Just 24 hours ago, Bankman-Fried confirmed he was seeking a $9.4bn package for FTX amid a scramble for funds to rescue the business.
The FTX co-founder later took to Twitter to apologise to investors in a long thread acknowledging his mistakes.
1) I'm sorry. That's the biggest thing.
I fucked up, and should have done better.
— SBF (@SBF_FTX) November 10, 2022
However, these plans were hit with a double blow when the Securities Commission of the Bahamas said it had frozen assets of FTX Digital Markets, a subsidiary of FTX, and then again earlier today, when the SEC confirmed its own review of the ailing business.