FTX Benefited From Venture Capitalists’ Suspension of Disbelief
The narrative that emerged in the days after the collapse of FTX, the $32.5 billion exchange at the center of Sam Bankman-Fried's crypto trading empire, was that it had to be the result of some highly sophisticated and nefarious scheme that only came to light following a series of unfortunate events. After all, some of the smartest minds in the financial world were sucked in: Sequoia Capital, Tiger Global Management and the Ontario Teachers' Pension Plan, to name a few.
And that's what the venture capital and pension funds that seeded FTX surely want you to believe. That they were unwitting victims in an unfortunate and complex saga nobody could have foreseen. Don't fall for it. While we still don't yet know all the facts, they shouldn't go blameless. Without their continual funding, stamp of approval and lack of questions, FTX never would have grown as big as it did. Their carelessness means FTX customers are out billions of dollars they are unlikely to ever recover.
Interviews given by Bankman-Fried in recent days suggest that FTX's failure is tied to pure incompetence. This was an enterprise destined to fail. Exhibit A: In a business where risk management is priority No. 1, Bankman-Fried now says there was no one at the company responsible for risk management. “That feels pretty embarrassing,” he told the audience at the New York Times DealBook Summit on Wednesday. And that's not all. FTX appears to have lacked anything remotely resembling a conventional board and subcommittees. Bloomberg News reports that it's unknown how many compliance staff — or even employees — FTX actually had. In a bankruptcy filing, court appointed CEO John J. Ray III said FTX had been unable to provide a complete list of who worked for it
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