Billionaire VC Owner Of Golden State Warriors: SoftBank Vision Fund Could Be Running ‘WeWorked’ Ponzi Scheme

Written by Staff
SoftBank
SoftBank’s $100B Vision Fund is one of the deepest capital pools in tech. It bankrolled WeWork, attracting a lot of attention. Softbank CEO Masayoshi Son attends a press conference near Tokyo, June 18, 2015. (AP Photo/Shizuo Kambayashi)

SoftBank isn’t technically a bank. Its name literally means “a bank of software” but its $100 billion Vision Fund has one of the deepest capital pools in all of tech. A Japanese conglomerate, SoftBank has bankrolled Uber, Slack and WeWork — the latter being the one most likely to ensure SoftBank becomes a household name.

How big is SoftBank? So far in 2019, SoftBank, its Vision Fund and related investing entities have dealt in more than 10 percent of all known venture capital dollar volume globally, according to a Crunchbase analysis.

SoftBank Vision Fund, a subsidiary of SoftBank, invests $100 million or more in growth-stage companies. The London-based fund is designed to be a catalyst for technology progress in anticipation that it will expand SoftBank’s capabilities. It aims to invest in businesses and foundational platforms that SoftBank believes will revolutionize and innovate the world tomorrow.

SoftBank is WeWork’s biggest investor and owns about a 29-percent stake in the company after investing $10.65 billion in the startup. WeWork‘s botched IPO won’t be the first time SoftBank CEO Masayoshi Son has flown too close to the sun, Crunchbase reported. WeWork’s meltdown has raised the level of attention and questions about Softbank’s investment strategies and business model.

For example, billionaire venture capitalist Chamath Palihapitiya, co-owner of the Golden State Warriors, retweeted a post from Kuwaiti investor and advisor Ali Al-Salim suggesting a possible SoftBank Ponzi scheme, if true.

“This is an official accounting presentation to help #Softbank investors understand how the Vision Fund accounting works. Interesting footnote indicating that 7% Preferred Coupon can be paid to shareholders by calling on capital from said shareholders… rinse and repeat”, Al-Salim tweeted.

Palihapitiya responded: “SoftBank Vision Fund is essentially running a Ponzi scheme if this is true…”

A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for early investors by acquiring new investors. In other words, new investors’ funds are used to pay the earlier backers. Ponzi schemes eventually bottom out when the flood of new investors dries up and there isn’t enough money to go around. At that point, the schemes unravel.

This isn’t the first time Palihapitiya has invoked the P-word.

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Palihapitiya got rich as an early Facebook employee before investing in tech and becoming part owner of the Golden State Warriors. In the past, he has referred to the entire startup economy as a Ponzi scheme.

In October 2018, Palihapitiya accused the startup cycle of raising funding rounds and spending money to boost user growth to attract bigger funding rounds, CNBC reported.

“We are, make no mistake … in the middle of an enormous multivariate kind of Ponzi scheme,” Palihapitiya said at the Launch Scale conference in San Francisco.