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> Hindsight 20/20. Valid point if they had effective due diligence but they didn't. FTX on a cost basis was 3% of the committed capital for the fund that held
by klelatti 4y ago
> Hindsight 20/20.
Valid point if they had effective due diligence but they didn't.
FTX on a cost basis was 3% of the committed capital for the fund that held FTX.
A minimal amount of due diligence on FTX would have saved them $150m and increased the fund's return by 3% - not a trivial amount.
Plus their name gave FTX credibility that probably led to others investing and losing money.
- nico 4y ago> Plus their name gave FTX credibility that probably led to others investing This is key. Have some friends who got into YC. As soon as they did, they had investors offering them money who had barely even seen their deck. Probably the same happens with Sequoia. Investors see that Sequoia invested and they just blindly follow suit.
- danuker 4y ago> A minimal amount of due diligence Exactly what due dilligence would have saved them? What numbers could they have looked at? How could they guard against those numbers being lies (cooked/parallel books)?
- klelatti 4y agoI'd usually have some sympathy with this perspective but there were so many red flags with FTX that there should be no excuse. Just because sophisticated fraud can sometimes be hard to detect doesn't give you a free pass for problems that are easy to spot.
- bmitc 4y ago> What numbers could they have looked at? How could they guard against those numbers being lies (cooked/parallel books)? That was part of the problem. The red flag should have been the fact that there were no numbers or books. Neither FTX nor Alameda even had a CFO.