Members of the Ontario Teachers’ Pension Plan (OTPP) have filed a class action lawsuit against the board of their own pension fund for its $95 million investment in the collapsed cryptocurrency exchange FTX as reported by Sunil Kavuri, a FTX creditor activist on his X post. This is the first legal action by a pension fund’s members against venture capital (VC) firms tied to FTX.
The lawsuit says that the pension plan’s leaders did not do their job properly when they invested in the cryptocurrency exchange. They should have done more research and been more careful before putting in $95 million. Instead, they ignored some big warning signs that gave clear signs that something was wrong with the cryptocurrency exchange. The key concerns outlined in the statement include failure to investigate exchange’s internal controls, governance, financial management, and cybersecurity practices.
Broader Legal Context: VCs Under Scrutiny
The FTX collapse has already led to lawsuits from customers against several investment firms that put money into the exchange. These firms, like Sequoia and Paradigm, are accused of not doing proper research and ignoring obvious problems with the cryptocurrency exchange. For example, the exchange did not even have basic roles such has chief financial officer, which was a major red flag.
Moreover, the compliance lead, Dan Friedberg has been historically tied to a $50 million poker scandal, which says a lot about the company itself.
FTX also has been questioned by critics for the lack of board of directors and basic security measures. These absence of members and positions make FTX’s operational and financial risk apparent to any informed investor.
Implications for Pension Funds and VCs
This OTPP lawsuit can set an example for other members in pension funds and investments firms to hold board accountable for high-risk decisions. This is also going to cause increased scrutiny of VC due diligence and a reevaluation of their responsibilities.
As the legal battle intensifies, the focus will remain on how institutional investors address oversight failures and rebuild trust after FTX’s high-profile collapse.
Also Read: Ex-Employee McShane & ZachXBT Slam Coinbase’s Security Lapses
