5 ms·

I don't know if it will happen, but a potentially good outcome here would be some regulation on the business practices of sufficiently large private companies i

I don't know if it will happen, but a potentially good outcome here would be some regulation on the business practices of sufficiently large private companies in order to ensure they meet some basic level of corporate governance. Maybe they don't need the same level of scrutiny publicly traded companies have, but establishing minimum standards of conduct would help avert crises like this that can spread across entire sectors.

oldgradstudent 4y ago
Fraud ands theft are already illegal.
- bombcar 4y ago
  And it's becoming more and more apparent that the "investors" had no desire to look closely at their golden baby.
- kieselguhr_kid 4y ago
  Yes, but the total lack of corporate governance that contributed to it is totally legal, and could have possibly prevented the fraud and theft.
  - luckylion 4y ago
    Not investing into companies that are obviously either frauds or extremely incompetent is the investor's job. We don't need a lot of new regulation to make it harder for you to buy bridges from people you meet on the subway.
    - kieselguhr_kid 4y ago
      The idea behind the lack of regulation is that the impact is contained to the investors. It's obvious that in sufficiently large cases, that's not true. If these actors are able to do damage to entire sectors, they should have to do some minimum stuff: keep track of their money, have board meetings, submit to audits, etc.
      - luckylion 4y ago
        And they will ... it's just that they'll provide false numbers to audits, their board will be them and their friends, and they'll keep track of their money as it makes its way into their pockets. I guess we need more blockchain! But what business will have 100% of their relationships, contracts and transactions publicly visible?
        PaulDavisThe1st 4y ago
        Prosecution for factually lying (e.g. "providing false numbers to audits") is much easier than prosecution for intentionally lying (i.e. fraud).
        luckylion 4y ago
        Do you believe they'll have trouble building a case against SBF & friends? I took the comments to mean they wanted something to stop this from occurring, and I don't think that works well, criminals are going to do what criminals do. You can prosecute afterwards, but you can't easily stop them before they do it, see Theranos, WireCard, Nikola etc etc.
        kieselguhr_kid 4y ago
        Have you worked with a reputable outside auditor? You don't just provide numbers and illustrate your methodology for obtaining them, you have to essentially reconstruct your entire revenue and finance system with them, provide ongoing random samplings, demonstrate the consistency of any calculations, and many, many other steps that I don't have time to illustrate. Companies couldn't just provide a false number, they'd have to construct a parallel revenue and finance system with false data. Do some companies still cheat and get away with it even after audits? Of course. But it's a major deterrent to this kind of behavior and a reputable auditor would have caught many of FTX's illegal activities much earlier.
        luckylion 4y ago
        That depends on how much effort it is to fool the auditors. Will it cost you 5bn a year or 5mn? It worked for Wirecard, and as far as I understand, it wasn't super sophisticated either.
- sarahowen62 4y ago
deleted 4y ago
[deleted]
vngzs 4y ago
In Europe there are rules that work out to: if you have 50 employees or assets over EUR ~5 million, you must disclose audited financial statements publicly (this is not strictly true, but it is true to a first order approximation). It wouldn't be crazy sounding to require that companies worth over $10 billion USD disclose financial statements audited by reputable firms.
- kieselguhr_kid 4y ago
  Some version of this would make sense to me.
- HWR_14 4y ago
  Disclose to a government agency or to the public. Those are very different beasts. Like, can I look up the statements of a particularly profitable McDonalds?

oldgradstudent 4y ago

Fraud ands theft are already illegal.

bombcar 4y ago
And it's becoming more and more apparent that the "investors" had no desire to look closely at their golden baby.
kieselguhr_kid 4y ago
Yes, but the total lack of corporate governance that contributed to it is totally legal, and could have possibly prevented the fraud and theft.
- luckylion 4y ago
  Not investing into companies that are obviously either frauds or extremely incompetent is the investor's job. We don't need a lot of new regulation to make it harder for you to buy bridges from people you meet on the subway.
  - kieselguhr_kid 4y ago
    The idea behind the lack of regulation is that the impact is contained to the investors. It's obvious that in sufficiently large cases, that's not true. If these actors are able to do damage to entire sectors, they should have to do some minimum stuff: keep track of their money, have board meetings, submit to audits, etc.
    - luckylion 4y ago
      And they will ... it's just that they'll provide false numbers to audits, their board will be them and their friends, and they'll keep track of their money as it makes its way into their pockets. I guess we need more blockchain! But what business will have 100% of their relationships, contracts and transactions publicly visible?
      - PaulDavisThe1st 4y ago
        Prosecution for factually lying (e.g. "providing false numbers to audits") is much easier than prosecution for intentionally lying (i.e. fraud).
        luckylion 4y ago
        Do you believe they'll have trouble building a case against SBF & friends? I took the comments to mean they wanted something to stop this from occurring, and I don't think that works well, criminals are going to do what criminals do. You can prosecute afterwards, but you can't easily stop them before they do it, see Theranos, WireCard, Nikola etc etc.
      - kieselguhr_kid 4y ago
        Have you worked with a reputable outside auditor? You don't just provide numbers and illustrate your methodology for obtaining them, you have to essentially reconstruct your entire revenue and finance system with them, provide ongoing random samplings, demonstrate the consistency of any calculations, and many, many other steps that I don't have time to illustrate. Companies couldn't just provide a false number, they'd have to construct a parallel revenue and finance system with false data. Do some companies still cheat and get away with it even after audits? Of course. But it's a major deterrent to this kind of behavior and a reputable auditor would have caught many of FTX's illegal activities much earlier.
        luckylion 4y ago
        That depends on how much effort it is to fool the auditors. Will it cost you 5bn a year or 5mn? It worked for Wirecard, and as far as I understand, it wasn't super sophisticated either.
sarahowen62 4y ago

deleted 4y ago

[deleted]

vngzs 4y ago

In Europe there are rules that work out to: if you have 50 employees or assets over EUR ~5 million, you must disclose audited financial statements publicly (this is not strictly true, but it is true to a first order approximation). It wouldn't be crazy sounding to require that companies worth over $10 billion USD disclose financial statements audited by reputable firms.

kieselguhr_kid 4y ago
Some version of this would make sense to me.
HWR_14 4y ago
Disclose to a government agency or to the public. Those are very different beasts. Like, can I look up the statements of a particularly profitable McDonalds?