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I don't think he's been involved in a startup. Usually people like this get involved in big bankruptcies. Usually startups aren't big bankruptcies. Most startu

I don't think he's been involved in a startup. Usually people like this get involved in big bankruptcies. Usually startups aren't big bankruptcies. Most startups work like this(minus the fraud). It is what it is. Approving things via chat is completely valid, for example. Several bot products have flows for approving expenses etc. All kinds of things are approved via chat these days.

kyawzazaw 4y ago
It's more than that.
- danielmarkbruce 4y ago
  But it's not less. Chaos + scam, chaos + future trillion dollar company, chaos + zero, and so on. Chaos is always there.
hn_throwaway_99 4y ago
Malarky, and I say this as someone that works in a fintech startup. This excuse that somehow because you're a startup you don't have to follow the most basic rules of accounting is nonsense, especially when you're handling billions in assets.
- danielmarkbruce 4y ago
  What does "follow the basic rules of accounting" mean? Have rigorous systems in place such that you can close your books within a day? See a real time view of your financial position at any minute? Show a set of financials which meet GAAP requirements but are hand done in excel and complete 8 weeks after qtr end? Get audited? Are you in the finance function at your startup? I'll guess no, and if you go ask someone there if it feels rigorous they'll laugh.
  - bunderbunder 4y ago
    This Gish gallop of questions strongly suggests that you don’t have a lot of experience in the financial industry yourself, and are trying to cover for it with bluster.
    - danielmarkbruce 4y ago
      It's one question. The others are some potential answers. Sometimes when one asks a question, it's unclear if they are looking for a nuanced response, or they literally have no idea what something means. You'll often see someone who wants the nuanced response offer a few potential answers as a way to signal they are looking for nuance. "Gish gallop" on wikipedia suggests something quite different.
  - hn_throwaway_99 4y ago
    > Are you in the finance function at your startup? Yes, I am. I'm in engineering but I have to work closely with our accounting team to make sure all the numbers add up and, importantly, that everything is auditable, and I built the systems to do this. I'll let Matt Levine say it better than I can. What passed for financial tracking at FTX (which was a financial company) is beyond disgusting. FTX had a "hidden, poorly internally labeled ‘fiat@’ account, with a balance of negative $8 billion. The result of adding or subtracting those numbers with ordinary numbers is not a number; it is prison."
    - danielmarkbruce 4y ago
      Then you are almost certainly an outlier, and it's nice to see. If I may ask, how old is the company? While the accounting situation at FTX appears to have been a disaster, it just doesn't seem out of the ordinary for a 2 year old company. What does negative $8 billion mean in the context of double entry? Matt says clever sounding things that don't add up sometimes..
      - hn_throwaway_99 4y ago
        No, we are not an outlier. Nearly all fintechs that work in traditional finance must have these controls in place, because otherwise nobody else will do business with them. E.g. you've got to have SOC 2 or ISO27001 compliance (or some other standard) for counterparties to even pick up the phone to do business with you. I don't mean to be rude, but you seem very unaware what standards are in this space. (Or rather, I should say the financial space, as everything seems to be a shitshow in crypto). You seem to be conflating what, say, some social media platform or todo app startup needs to do for compliance vs. a financial company. FTX was in the business of handling other people's money, and they can't even say where billions of dollars have gone. If you think this is just normal "startup chaos", please, please, please don't ever work in a financial startup.
        danielmarkbruce 4y ago
        Without naming names, there are specific well known fintechs who were not SOC or ISO compliant when they were 2 years old. And SOC compliance is self determined anyway I believe. Plenty of people did business with them because their customers were small businesses (mostly startups) who didn't think about such matters. These were/are good companies, doing the right thing, but not doing things they didn't need to do. Plenty of businesses did business with FTX. The things large enterprise want in a vendor or counterparty are generally not a consideration outside large enterprise. I used to be involved with oil price hedging where our counterparties were small/mid sized oil and gas producers - it didn't even occur to them that they were taking credit risk on us or that they should know if we had a credit rating.
  - nikanj 4y ago
    Basic rules as in ”when the funds move from corporate account to founder account, is it a dividend, a loan, a bonus, or something else”. Basic rules as in ”not printing our own tokens as collateral for our own loans”
    - danielmarkbruce 4y ago
      The first is a legal determination and maybe a contract issue. The accounting for it is easy - accounting for thousands/millions/billions of transactions is difficult. The second is not an accounting issue, it's a combination of legal and business judgement.
  - JumpCrisscross 4y ago
    > What does "follow the basic rules of accounting" mean? I mean, know how many employees and roughly how much cash you have, or at least be able to find out inside a week? Don't forget where you put eight billion dollars?
    - danielmarkbruce 4y ago
      From the outside "accounting" might seem quite well defined and narrowly scoped. It's actually a big discipline and in many places quite ill defined. See here: https://en.wikipedia.org/wiki/Accounting https://en.wikipedia.org/wiki/Accounting Look at the "topics" for example. There is a lot to it. To anyone who knows the field, the statement "you should follow accounting rules" is so vague it's meaningless.
      - JumpCrisscross 4y ago
        > the statement "you should follow accounting rules" is so vague it's meaningless We aren’t quibbling over GAAP versus IFRS. Anyone looking at FTX’s lack of accounting and control and seeing even a shade of familiarity at their firm should speak to a lawyer. Start-ups will be start-ups, but if you’re taking outside money and literally can’t say where your bank accounts are, run the hell away.
        danielmarkbruce 4y ago
        Most accounting issues aren't legal issues. Most businesses can't give you an up to the current date balance sheet. Most VCs don't get audited financials for most of their early stage investments. Most financials given to VCs have errors in them, most of the errors will be harmless and wouldn't meet any definition of fraud (legal or pub talk). Virtually none would meet GAAP if audited. Most early stage businesses don't have good management/cost accounting in place and can't actually work out exactly what's going on. FTX seems to have been doing actual bad stuff - moving assets between companies that would never be done at arms length. From a practical perspective, it's almost sending money to the founder. If someone sees their company doing that, yeah, talk to someone. But that is not an accounting issue. The chaos and lack of accounting rigor is.. just not rare or surprising.
  - nvader 4y ago
    My friend, sounds like you need a good lawyer.
    - danielmarkbruce 4y ago
      To fix other people's finance/accounting systems...?
Barrin92 4y ago
I don't think "most startups" happen to lose billions of their customers money. You can be a super-stealth-ninja-startup, when you're handling dollar sums with nine zeroes you better do things in a more orderly way than "via chats". I worked at two small companies in the financial sector and both had compliance and legal assistance, nobody would even wire a hundred bucks anywhere without knowing where it went.
- danielmarkbruce 4y ago
  Then they were wild outliers. Money gets wired and lost by practically all financial institutions with some frequency. It usually gets tracked down eventually... but it's way messier than it seems.
  - orhmeh09 4y ago
    How do you know this and why should we believe you?
    - danielmarkbruce 4y ago
      Anyone who worked in finance knows, but it's also reported reasonably frequently. Great case: https://www.cnn.com/2021/02/16/business/citibank-revlon-lawsuit-ruling https://www.cnn.com/2021/02/16/business/citibank-revlon-laws...
bunderbunder 4y ago
The word "startup" should not serve as a general-purpose "get out of responsibility free" card. The level of organization and internal controls a company needs is a function of what it’s doing and, to a lesser extent, how big it is. The age of the company is not a factor. Financial exchanges, in particular, have particularly strict fiduciary obligations that come into effect the day they start operations.
- danielmarkbruce 4y ago
  Mostly agree with the "should". But the guy saying it's "unprecedented" is miles off. There is plenty of precedent at young companies, he's just not aware of them, and they (almost?) all had a smaller balance sheet.

kyawzazaw 4y ago

It's more than that.

danielmarkbruce 4y ago
But it's not less. Chaos + scam, chaos + future trillion dollar company, chaos + zero, and so on. Chaos is always there.

hn_throwaway_99 4y ago

Malarky, and I say this as someone that works in a fintech startup. This excuse that somehow because you're a startup you don't have to follow the most basic rules of accounting is nonsense, especially when you're handling billions in assets.

danielmarkbruce 4y ago
What does "follow the basic rules of accounting" mean? Have rigorous systems in place such that you can close your books within a day? See a real time view of your financial position at any minute? Show a set of financials which meet GAAP requirements but are hand done in excel and complete 8 weeks after qtr end? Get audited? Are you in the finance function at your startup? I'll guess no, and if you go ask someone there if it feels rigorous they'll laugh.
- bunderbunder 4y ago
  This Gish gallop of questions strongly suggests that you don’t have a lot of experience in the financial industry yourself, and are trying to cover for it with bluster.
  - danielmarkbruce 4y ago
    It's one question. The others are some potential answers. Sometimes when one asks a question, it's unclear if they are looking for a nuanced response, or they literally have no idea what something means. You'll often see someone who wants the nuanced response offer a few potential answers as a way to signal they are looking for nuance. "Gish gallop" on wikipedia suggests something quite different.
- hn_throwaway_99 4y ago
  > Are you in the finance function at your startup? Yes, I am. I'm in engineering but I have to work closely with our accounting team to make sure all the numbers add up and, importantly, that everything is auditable, and I built the systems to do this. I'll let Matt Levine say it better than I can. What passed for financial tracking at FTX (which was a financial company) is beyond disgusting. FTX had a "hidden, poorly internally labeled ‘fiat@’ account, with a balance of negative $8 billion. The result of adding or subtracting those numbers with ordinary numbers is not a number; it is prison."
  - danielmarkbruce 4y ago
    Then you are almost certainly an outlier, and it's nice to see. If I may ask, how old is the company? While the accounting situation at FTX appears to have been a disaster, it just doesn't seem out of the ordinary for a 2 year old company. What does negative $8 billion mean in the context of double entry? Matt says clever sounding things that don't add up sometimes..
    - hn_throwaway_99 4y ago
      No, we are not an outlier. Nearly all fintechs that work in traditional finance must have these controls in place, because otherwise nobody else will do business with them. E.g. you've got to have SOC 2 or ISO27001 compliance (or some other standard) for counterparties to even pick up the phone to do business with you. I don't mean to be rude, but you seem very unaware what standards are in this space. (Or rather, I should say the financial space, as everything seems to be a shitshow in crypto). You seem to be conflating what, say, some social media platform or todo app startup needs to do for compliance vs. a financial company. FTX was in the business of handling other people's money, and they can't even say where billions of dollars have gone. If you think this is just normal "startup chaos", please, please, please don't ever work in a financial startup.
      - danielmarkbruce 4y ago
        Without naming names, there are specific well known fintechs who were not SOC or ISO compliant when they were 2 years old. And SOC compliance is self determined anyway I believe. Plenty of people did business with them because their customers were small businesses (mostly startups) who didn't think about such matters. These were/are good companies, doing the right thing, but not doing things they didn't need to do. Plenty of businesses did business with FTX. The things large enterprise want in a vendor or counterparty are generally not a consideration outside large enterprise. I used to be involved with oil price hedging where our counterparties were small/mid sized oil and gas producers - it didn't even occur to them that they were taking credit risk on us or that they should know if we had a credit rating.
- nikanj 4y ago
  Basic rules as in ”when the funds move from corporate account to founder account, is it a dividend, a loan, a bonus, or something else”. Basic rules as in ”not printing our own tokens as collateral for our own loans”
  - danielmarkbruce 4y ago
    The first is a legal determination and maybe a contract issue. The accounting for it is easy - accounting for thousands/millions/billions of transactions is difficult. The second is not an accounting issue, it's a combination of legal and business judgement.
- JumpCrisscross 4y ago
  > What does "follow the basic rules of accounting" mean? I mean, know how many employees and roughly how much cash you have, or at least be able to find out inside a week? Don't forget where you put eight billion dollars?
  - danielmarkbruce 4y ago
    From the outside "accounting" might seem quite well defined and narrowly scoped. It's actually a big discipline and in many places quite ill defined. See here: https://en.wikipedia.org/wiki/Accounting https://en.wikipedia.org/wiki/Accounting Look at the "topics" for example. There is a lot to it. To anyone who knows the field, the statement "you should follow accounting rules" is so vague it's meaningless.
    - JumpCrisscross 4y ago
      > the statement "you should follow accounting rules" is so vague it's meaningless We aren’t quibbling over GAAP versus IFRS. Anyone looking at FTX’s lack of accounting and control and seeing even a shade of familiarity at their firm should speak to a lawyer. Start-ups will be start-ups, but if you’re taking outside money and literally can’t say where your bank accounts are, run the hell away.
      - danielmarkbruce 4y ago
        Most accounting issues aren't legal issues. Most businesses can't give you an up to the current date balance sheet. Most VCs don't get audited financials for most of their early stage investments. Most financials given to VCs have errors in them, most of the errors will be harmless and wouldn't meet any definition of fraud (legal or pub talk). Virtually none would meet GAAP if audited. Most early stage businesses don't have good management/cost accounting in place and can't actually work out exactly what's going on. FTX seems to have been doing actual bad stuff - moving assets between companies that would never be done at arms length. From a practical perspective, it's almost sending money to the founder. If someone sees their company doing that, yeah, talk to someone. But that is not an accounting issue. The chaos and lack of accounting rigor is.. just not rare or surprising.
- nvader 4y ago
  My friend, sounds like you need a good lawyer.
  - danielmarkbruce 4y ago
    To fix other people's finance/accounting systems...?

Barrin92 4y ago

I don't think "most startups" happen to lose billions of their customers money. You can be a super-stealth-ninja-startup, when you're handling dollar sums with nine zeroes you better do things in a more orderly way than "via chats". I worked at two small companies in the financial sector and both had compliance and legal assistance, nobody would even wire a hundred bucks anywhere without knowing where it went.

danielmarkbruce 4y ago
Then they were wild outliers. Money gets wired and lost by practically all financial institutions with some frequency. It usually gets tracked down eventually... but it's way messier than it seems.
- orhmeh09 4y ago
  How do you know this and why should we believe you?
  - danielmarkbruce 4y ago
    Anyone who worked in finance knows, but it's also reported reasonably frequently. Great case: https://www.cnn.com/2021/02/16/business/citibank-revlon-lawsuit-ruling https://www.cnn.com/2021/02/16/business/citibank-revlon-laws...

bunderbunder 4y ago

The word "startup" should not serve as a general-purpose "get out of responsibility free" card. The level of organization and internal controls a company needs is a function of what it’s doing and, to a lesser extent, how big it is. The age of the company is not a factor. Financial exchanges, in particular, have particularly strict fiduciary obligations that come into effect the day they start operations.

danielmarkbruce 4y ago
Mostly agree with the "should". But the guy saying it's "unprecedented" is miles off. There is plenty of precedent at young companies, he's just not aware of them, and they (almost?) all had a smaller balance sheet.