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How did no one in their entire finance or accounting department catch this very early on? It's a very simple process to compare assets to liabilities... usually

How did no one in their entire finance or accounting department catch this very early on? It's a very simple process to compare assets to liabilities... usually accounting is monitoring bank balances on a daily/weekly/monthly for their bank to book reconciliation. The entire company must have been full of criminals for them to have gotten away with this for so long.

thoughtstheseus 3y ago
They had no controls around cash and asset management. There was nothing to reconcile. Perhaps it’s criminal but it is certainly incompetence.
IG_Semmelweiss 3y ago
The VC money backing SBF deserves the loss for not putting the default clause into their A raise to force a professional audit within 18 months of the raise. The sad part is the depositors that got caught in this mess. If SBF was not a trading platform, but say, a medical device company, this story would have had a much more palatable set of victims.
jowea 3y ago
Not a full answer but I think it hints at it. > The new CEO of the collapse cryptocurrency trading firm FTX, who oversaw Enron’s bankruptcy, said he has never seen such a “complete failure” of corporate control. > John Ray III, in a filing with the U.S. bankruptcy court for the district of Delaware, said there was a “complete absence of trustworthy financial information.” > “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray said. “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” > https://fortune.com/2022/11/17/ftx-bankruptcy-filing-john-ray-never-seen-complete-failure-sam-bankman-fried/ https://fortune.com/2022/11/17/ftx-bankruptcy-filing-john-ra...
- echion 3y ago
  I don't doubt Ray's mostly right, but remember he has huge incentives to make the problem seem as bad as possible: payment justification, reputation-burnishing, self-importance, etc.

thoughtstheseus 3y ago

They had no controls around cash and asset management. There was nothing to reconcile. Perhaps it’s criminal but it is certainly incompetence.

IG_Semmelweiss 3y ago

The VC money backing SBF deserves the loss for not putting the default clause into their A raise to force a professional audit within 18 months of the raise. The sad part is the depositors that got caught in this mess. If SBF was not a trading platform, but say, a medical device company, this story would have had a much more palatable set of victims.

jowea 3y ago

Not a full answer but I think it hints at it. > The new CEO of the collapse cryptocurrency trading firm FTX, who oversaw Enron’s bankruptcy, said he has never seen such a “complete failure” of corporate control. > John Ray III, in a filing with the U.S. bankruptcy court for the district of Delaware, said there was a “complete absence of trustworthy financial information.” > “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” Ray said. “From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.” > https://fortune.com/2022/11/17/ftx-bankruptcy-filing-john-ray-never-seen-complete-failure-sam-bankman-fried/ https://fortune.com/2022/11/17/ftx-bankruptcy-filing-john-ra...

echion 3y ago
I don't doubt Ray's mostly right, but remember he has huge incentives to make the problem seem as bad as possible: payment justification, reputation-burnishing, self-importance, etc.