This introduction to Version 0 report on FTX Bankruptcy is described by Bloomberg as a “doozie”. Here is the new FTX CEO John Ray report introduction.

5. 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. 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.

Report:

This graphic from Bloomberg highlights both the complexity and the centralised control under one inexperienced, over confident and non trustworthy individual.

My own mind always goes back to the famous Reagan quote referring to Russia during the Cold War – “trust but verify”.

One basic premise of crypto is to create a new system that is not constrained by traditional banking regulation but rather is based on transparency.

Relevance to Bankwatch:

What does transparency mean? In the case of Bankman-Fried it means freedom to do as he wishes with no oversight even from his own Boards let alone regulators. I say Boards advisedly because with 130 separate corporate entities, each requires a Board.

There are at least one (1) million people who are not sure where their money is or if they have any money in the case of inexperienced all in investors.

Before we get ahead of ourselves with the power of the blockchain platform concept, we need to understand what controls will handle the risks of aggregating and looking after peoples money.

Morals

Think of the morals in “Its a Wonderful Life” in the context of depositor funds co-mingling. Think Ponzi, con-man and criminal.