Director of Portfolio Development at Pantera Capital, Franklin Bi, has created a Twitter thread discussing portfolio preventative measures taken following the recent FTX and Alameda Research fallout.
1/ The past few days have tested our industry, with fallout for months to come.
Here’s an excerpt from a note to @PanteraCapital founders / investors re: impact to our portfolio & actions we took in the first 24 hrs.
Hope it can help other builders & funds navigate ahead.
— franklin (@FranklinBi) November 10, 2022
The Pantera team “assembled a virtual war room” to carry out a thorough risk assessment of their early-stage portfolio, and to establish an action plan set for immediate implementation. Their two goals were:
- To identify potential risks their portfolio teams might be exposed to
- To reach out to at-risk teams directly and offer assistance
Aiming to rapidly establish and carry out these two goals, Franklin emphasized that in times of crisis, “we must act and act quickly.”
Risk Assessment & Identification
Five main risks were identified, three of which were deemed urgent, according to Franklin.
The five risks were:
- Counterparty risk: Outstanding credit exposure to FTX / Alameda; risk of default
- Custodial risk: Holding funds in FTX accounts; risk of funds being frozen or lost
- Price volatility risk: Holding certain assets, e.g., FTT, on balance sheet; risk of price exposure
- Investment risk: FTX / Alameda is a direct investor; risk of liquidation in unwind or sale process
- Customer risk: FTX / Alameda is a customer; risk of revenue loss
Up to 70 portfolio companies were identified as having “potentially significant [and] urgent exposure”.
The majority of this group consisted of centralized finance (CeFi) companies, decentralized finance (DeFi) protocols, and anyone who may hold tokens in their treasury. Pantera plans to continue and expand on this process over the coming weeks, and months.
Day 1 Findings
Up to 95% of the portfolio teams within the initial outreach had little to no exposure to FTX or Alameda — this was partially attributed to proactive risk management as well as custody and treasury management practices.
Two early-stage teams identified within the remaining 5% were flagged for having over 50% of funds locked on FTX, potentially impacting their runway. Pantera said it remains committed to helping the two teams explore all available options.
A further two teams have publicly disclosed their status and are receiving support from Pantera.
1/ We are glad to share that Cega has received $13.6M USDC in funds from Alameda which covers 100% of Cega’s trading exposure to Alameda & yield owed to date. All users with exposure to Alameda trades (Cruise Control, Genesis Basket, Supercharger vaults) can feel secure.
— cega ? (@cega_fi) November 10, 2022
1) We’ve experienced multiple market cycles over the past 5 years, and our focus has been and continues to be the same – delivering an industry-leading service for trading, storing, hedging, and managing digital assets with a key focus on these core pillars.
— Amber Group (@ambergroup_io) November 9, 2022
Ultimately, the impact on Pantera is minimal and any exposure has been resolved swiftly and smoothly.
With zero exposure to Alameda, Pantera’s FTX/FTT exposure is limited to roughly 2% of the total AUM as a result of their Blockfolio 2020 acquisition.
Franklin closed his thread by saying:
“We’re unshaken – and more importantly, we’re here to support you however we can. Our battle scars are to your benefit. Reach out to anyone on our team anytime.”