The Ontario Teachers’ Pension Plan, or OTPP, is caught in the crossfire of a feud between rival crypto billionaires, and it has the potential to render its multi-million-dollar investment in FTX worthless.
Last year, through its Teachers’ Innovation Platform (TIP) arm, the OTPP participated in a US $420 million 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 raising US $400 million, which increased the company’s valuation to a whopping US $32 billion. Simultaneously, the OTPP invested even more funds into FTX US, the U.S.-based crypto exchange, then valued at US $8 billion.
Last week, reports emerged that Alameda Research, the trading firm of Sam Bankman-Fried, FTX founder, had somehow leaked its balance sheet. It showed they had understated the value of its FTT token holdings in FTX by more than US $2 billion.
The revelations spooked investors who made the connection between the two firms and started pulling funds off the FTX exchange and panic-selling 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 to its current value of just over US $3.59.
The exact loss as part of the FTX fallout is 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 the 2021 annual report reveals that its innovation arm, called Teachers’ Venture Growth (TVG), held a C $7.1 billion position comprising 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 $355 million 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 has 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 told 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.