SBF is, of course, Sam Bankman-Fried. FTX is his crypto exchange. Mr. BF has now been released on $250 million bail. A chunk of that was real estate pledged by his parents. At least one of them was involved in the FTX fraud. Leading one to wonder if SBF just bailed himself out.
Before delving into the intricacies of FTX accounting, let me make one thing clear. This is not a fraud involving fancy accounting, the mysteries of crypto currencies, or anything else. This is outright theft. Mr. BF helped himself to customer funds that were being held in trust. It’s similar to robbing a bank. And it’s a very, very big no-no.
With that as a backdrop, here are a few goodies from FTX’s “accounting practices” and strategy.
- FTX was using Quickbooks to do their accounting. Now I have a lot of respect for Quickbooks. In fact, I’ve used it a few times for my business. But I am nowhere near a multi-billion dollar enterprise. What FTX needed was a dozen or so CPAs on the payroll. Instead, they had clowns.
- The company was processing expense claims submitted in a Slack channel. Yeah, that’s real professional. Essentially, the company had no cost controls. In fact, they had no way of even tracking costs.
- SBF spread cash around liberally. Recipients included newspapers and other media outlets (advertising and donations); campaign contributions to, well, every politician SBF thought could help; and parties, conferences, and other events designed to give his operation legitimacy.
- A third entity, Alameda Research, was the recipient of the purloined customer funds. Alameda was a hedge fund created by (you guessed it) SBF.
I urge everyone to read the excellent article by Ashley Rindsberg in Tablet Magazine. She delves into many more of the unsavory details. If that’s tl;dr, here’s a tweet thread by Chartered Financial Analyst Genevieve Roch-Decter. Fasten your seat belt. This is a wild ride.