Cryptocurrency venture firm Mechanism Capital, which has hundreds of millions of dollars in assets, is among the companies that have been unable to withdraw funds from FTX, according to an official Twitter post from The Block, who spoke to a person close to the matter.
“Mechanism Capital among funds with assets stuck in FTX, exploring legal options.”
The news was confirmed following an announcement by a co-founder and partner at Mechanism Capital, Andrew Kang, saying the sum is “non-trivial.” A post on the same from Twitter user @RyanJamesWeeks reads:
“Like the rest of the market, we have taken a hit — but what’s most important for us is that we are still trading, actively assessing investment opportunities, and can support founders we work with.”
Along with the announcement, Kang painfully emphasized the company’s successful streak before the travails of FTX happened. He said:
“We had a very profitable trading year among the wider market drawdown before the FTX incident. We were short the market into the earlier implosions in April, May, and June.”
Noteworthy, Kang assured that while the fund was exploring legal options, it remains operational.
Mechanism Capital is a reputed supporter of crypto projects, having backed startups like Nansen, 1inch, and Arbitrum. The company’s leading trading and venture capital arm comprise proprietary capital, as is the $100 million fund launched in January as an investment in play-to-earn (P2E) gaming startups.
FTX Sales Team Was Unaware of Company’s Potential Insolvency
On November 11, the head of institutional sales at FTX, Zane Tackett, sent a letter to VIP clients announcing his resignation. In the letter, the now ex-FTX official disclosed that his team was not privy to the company’s potential insolvency as the situation unfolded the past week.
“Foremost, the VIP team was left entirely in the dark and were in no way aware that FTX was insolvent or that customer asset were at any point not backed 1:1.
The announcement was part of Zane’s move to absolve his team of any blame for clients, noting that they, too, had been fooled. The VIP team had difficulty handling withdrawals following Binance’s declaration of intent to sell its stake in FTX’s native token, FTT. According to several sources, the headwinds due to Changpeng Zhao fueled tensions between FTX leadership and the VIP team.
Companies Caught in the FTX Crossfires
A Wall Street Journal report dated November 11 revealed that FTX had lent billions of dollars in customer assets to its corporate sibling Alameda Research. Mechanism Capital is one of many affected. Several other companies, from crypto exchanges and lenders to venture capital investors, are still trying to access their funds stuck in the FTX exchange following the company’s recent collapse.
Days after FTX’s spectacular collapse, more companies are still issuing statements about their exposure to FTX. A November 9 announcement on The Block showed that Multicoin Capital, a crypto venture firm, had up to 10% of its assets stuck on FTX.
Similarly, venture investors like Sequoia Capital, FTX’s business affiliates, also face huge losses. According to reports, the venerable Silicon Valley investors have already documented losing investments totaling $213.5 million in FTX.