Ontario Teachers’ Pension Plan Faces Lawsuit Over FTX Losses

• OTPP is facing allegations for a failed FTX investment.
• Critics have accused the board of breaking fiduciary duties in due diligence.

Ontario Teachers’ Pension Plan has been taken to court for sinking $95 million into the recently bankrupted FTX, cryptocurrency exchange. The Ontario Superior Court reported that a plan member is suing OTPP. The member claims that the board of trustees defaulted on their fiduciary duties. These duties relate to due diligence into the governance and risk controls for the investment at stake.

The investments, totaling $75 million in October 2021 and $20 million in January 2022, are fully written off by November 2022 due to the collapse of FTX when it was accused of improperly using customer funds and having woeful internal controls. According to the lawsuit, OTPP violated its investment policy. The violation occurred through its failure to sufficiently scrutinize risks in governance and responsible investing.

OTPP Denies Allegations Amid Scrutiny

A spokesperson for OTPP dismissed the lawsuit as baseless. They affirmed the pension plan’s commitment to conducting robust due diligence on all private investments. The investments represented only 0.05% of OTPP’s $247 billion in net assets. They were part of the Venture Growth platform, which focuses on discovering new opportunities in financial technology.

All this notwithstanding, it is evident from court documents that FTX was characterized by bad governance, poor cybersecurity, and even mishandling of customers’ funds the board could have easily raised red flags. The lawsuit now seeks losses as well as allegations that the board failed to gather reliable information on FTX’s operations.

Although the allegations are yet to be tested in court, OTPP has shown itself to be open to regulatory oversight of the FTX debacle and appeared to express alarm at the alleged fraud that brought about the collapse of the cryptocurrency exchange.

The case will be an important litmus test for those who believe that pension funds have a duty to seek innovative investments and simultaneously protect the financial interests of their members.