I read this post with interest having followed the FTX crypto scandal for some time, and to me, the complete lack of controls is staggering - more to the point, where is the compliance?
This specific remark from the CEO is simply unbelievable
Sam Bankman-Fried admitted it has been a “bad month” after FTX collapsed into bankruptcy, leaving thousands of people frozen out of their savings.
A “bad month”? You’re not kidding. If anything, this is a hard lesson learned when corporate governance, compliance, and a complete lack of control all combine - certainly not helped by market volatility around the value of bitcoin. Below is a timeline of how FTX’s value tanked pretty much overnight
Frankly, FTX is nothing short of a mess, and it’s hard to understand how this company was allowed to simply freefall in this manner without the necessary oversight from the regulator. In fact, (announced this morning) Rostin Behnam, chairman of the Commodity Futures Trading Commission, is to be grilled over whether the turmoil could have been avoided with better oversight.
There are also a number of rumours concerning the claims Bankman-Fried moved $10bn out of the company in secret, and, to make matters worse, reports suggest that at least $1bn has simply “vanished”. Bankman-Fried has admitted that his businesses “completely failed” when it came to risk management - but more to the point, how on earth was such a catastrophic implosion not spotted during an audit or from oversight by the regulator?
What is pretty certain is that not everyone is going to get their money back based on the comment made by Bankman-Fried.
Although the embattled entrepreneur believes that American users should be able to get their money back in full, he has warned in other interviews that international customers may only get 20% to 25% of the money they had locked into FTX.
There’s a great article from Coindesk that provides a deeper insight into the collapse of FTX here.
The question that does remain is whether the spectacular collapse of FTX will damage bitcoin in any way. My personal view is that it won’t, but if anything, mixing market volatility with a complete lack of controls and a litany of failures at management level can only spell disaster.
I’m interested to know if anyone here currently invests in bitcoin - or is considering doing so? I’m no crypto currency expert by any means but I certainly have an exceptional level of experience around corporate governance and associated financial controls. I just find it incredible that FTX was allowed to implode in this manner.
One thing is certain. A criminal investigation has been launched in the Bahamas concerning the collapse, and no doubt this will likely expose not just gaps in financial controls, but essentially, Grand Canyons.
I’ll be watching this story with a lot of interest.