The fall of FTX again reminds us of the importance of good corporate governance:
FTX, one of the biggest cryptocurrency exchanges in the world, recently filed for bankruptcy, and it has been revealed that between 1 billion and 2 billion US dollars in customer funds reportedly could not be accounted for as of today (November 15th) and the figure is supposed to be much higher than that. Apparently, the founder Sam Bankman moved customer funds from FTX to Alameda Research, which is a trading firm founded by him, to help Alameda meet its liabilities.
FTX has investors such as Tiger Global Management, the Ontario Teachers’ Pension Plan, SoftBank Group Corp., and Sequoia Capital. It is just incredible to see how these big names could not ensure proper governance and control in the operations and management of their portfolio company and let the Founder do whatever he wanted without any accountability. This becomes more important when the company is providing financial services and responsible for handling customer funds. It also seems that FTX does not have a CFO (Chief Financial Officer) despite dealing with billions of dollars of client money, which is astonishing really.
The crypto ecosystem has been suffering lately with firms like Voyager and Celsius filing for bankruptcy earlier this year. Trust is of utmost importance in the financial industry and these kinds of bad news pose a serious risk of broader contagion in this space. It is high time Silicon Valley and institutional investors made the founders and their portfolio companies more accountable and ensure good corporate governance and control to avoid such collapses in the future.
Sakib Noor is an Engineer and Financial Analyst residing in Vancouver, Canada
