Sequoia Capital shakes up crypto team after $214 million FTX loss

Sequoia Capital’s longtime partner Michael Moritz has departed, recent reports reveal. 

After 37 years, Moritz is redirecting his efforts towards Sequoia Heritage, a wealth management business he co-founded in 2010. 

Managing assets of over $15 billion, the fund will become his primary focus, encompassing a significant portion of his family foundation, Crankstart’s resources.

For a seamless transition, sources have confirmed that Moritz will remain on the boards of several Sequoia-backed companies, including Stripe Inc., even though he is no longer involved in day-to-day operations. 

Crypto investment missteps trigger departures

Sequoia Capital’s venture into the cryptocurrency market resulted in some major setbacks, prompting significant investor departures. 

The venture capital had invested in FTX, a cryptocurrency exchange that collapsed, resulting in a massive loss of $214 million from its global growth fund. Although the loss is a small fraction of the firm’s total assets, it impacted Sequoia’s reputation. 

Some important individuals involved in crypto investments are leaving the firm. Michelle Fradin, who was instrumental in investing in FTX, and Daniel Chen, associated with the “crypto maxi” community, are among those departing. Additionally, Kais Khimji, a partner who focuses on later-stage companies, and Mike Vernal, a senior partner with a broad portfolio, will also leave.

Geopolitical pressures 

Sequoia Capital announced in June that it would separate its operations in China and India from those in the United States due to increasing geopolitical tensions between Silicon Valley and China, resulting in a distancing strategy.

Sequoia Heritage was spun off as part of this split, where Michael Moritz serves as a founding limited partner and board member. 

Lawsuit over FTX promotion 

The crypto investment woes further escalated when Sequoia Capital, Thoma Bravo, and Paradigm faced a class-action lawsuit filed by investors. 

 The suit alleges that these entities promoted FTX’s legitimacy through marketing campaigns, even as the crypto exchange eventually went bankrupt. 

Investors claim that the defendants’ endorsement gave an “air of legitimacy” to the exchange, resulting in substantial financial losses.