Nov 13, 2022·edited Nov 13, 2022Liked by Jeffrey Carter
As I have stated many times in the past, Gary Gensler is a POS who is corrupt and unethical, as well as ignorant, and that is a dangerous combination.
I also made a post that was a joking paraphrase of our president when I said the problem with FTX was very simple and I just had two words:"inadequate due diligence",relating to any type of investment with FTX.
The Sam Bankman-Frieds, John Corzines and Bernie Madoffs of the world all got away with their crimes for a short time due to the same flaw in humanity that allows grifters and other con men throughout history to succeed and that is greed exacerbated by misplaced enthusiasm in people who have not done their homework.
The auditors for these people should be ashamed of themselves. Unfortunately, they will not be and they are as much to blame as anyone else, unless they were presented with false information.
During the runaway bull market about a year and a half ago I had accounts open at a dozen or so exchanges, but only money in seven or eight of them at any given time, and while I looked at FTX, I was uncomfortable with the exchange and the company.
Sometimes after years of experience, intuition contains more than just a sense or a feeling, it's a tingling spider sense that throws up red flags, even when we can't put our finger on them and specify what they are at the moment.
I cannot help but draw similarities between this and Refco, MF Global, PFG, etc. I do not spend a lot of time researching these crypto firms but when I hear that so called "smart money" was investing in a firm that had no Board of Directors....well just like you mentioned....fault is your own...not SBF. How can we keep repeating these errors of the past? Think about Binance...they refuse to tell regulators/governments where their HQ is. Seems like another slow boil happening there as well. Eventually crypto will be mainstream but until there are some guard rails installed its still like the wild west.
No doubt what I would do , Ye shall know the truth and the truth shall set you free. Money is great to have, but if it means burying it off shore and sipping cocktails in Burmuda, like Corzine did, thanks anyways. What a loser.
I think your hypothetical makes the decision analysis more complicated than necessary.
Presumably, you have a (mental) checklist for due diligence that must be satisfied prior to commitment to an investment--which (among other things) includes management oversight/supervision, internal controls, and transparency. Most of this is straightforward and would be common to/shared by all VC investors. Lacking a board of directors means none of these factors can be assured of fulfillment.
Do you really want to co-invest with others (irrespective of clubby network) who are willing to cut corners to overlook due diligence failure for the sake of a "hot" investment? (Isn't that Bill Gurley's point?)
Though, I think your main point is that investing requires discipline, especially when meeting fiduciary responsibilities.
It's been my impression that these failures haven't been a result of overlooking due diligence failures, but rather omitting due diligence altogether and proceeding on the word-of-mouth say-so of others. E.g., Theranos, using a high-profile advisory board, and Madoff's was clubby word-of-mouth.
But he was doing it for the earth! In reality he was a half-assed Madoff and was seen a while ago. But not by the virtue-signaling "smart money" crowd. https://www.ft.com/content/eac0e56c-f30b-4591-b603-f971e60dc58b?shareType=nongift
You'll love this one. FTX scored higher than Exxon Mobil on ESG Leadership and Governance. Another scam!
https://twitter.com/daniellasussman/status/1591651219424309250
As I have stated many times in the past, Gary Gensler is a POS who is corrupt and unethical, as well as ignorant, and that is a dangerous combination.
I also made a post that was a joking paraphrase of our president when I said the problem with FTX was very simple and I just had two words:"inadequate due diligence",relating to any type of investment with FTX.
The Sam Bankman-Frieds, John Corzines and Bernie Madoffs of the world all got away with their crimes for a short time due to the same flaw in humanity that allows grifters and other con men throughout history to succeed and that is greed exacerbated by misplaced enthusiasm in people who have not done their homework.
The auditors for these people should be ashamed of themselves. Unfortunately, they will not be and they are as much to blame as anyone else, unless they were presented with false information.
During the runaway bull market about a year and a half ago I had accounts open at a dozen or so exchanges, but only money in seven or eight of them at any given time, and while I looked at FTX, I was uncomfortable with the exchange and the company.
Sometimes after years of experience, intuition contains more than just a sense or a feeling, it's a tingling spider sense that throws up red flags, even when we can't put our finger on them and specify what they are at the moment.
I cannot help but draw similarities between this and Refco, MF Global, PFG, etc. I do not spend a lot of time researching these crypto firms but when I hear that so called "smart money" was investing in a firm that had no Board of Directors....well just like you mentioned....fault is your own...not SBF. How can we keep repeating these errors of the past? Think about Binance...they refuse to tell regulators/governments where their HQ is. Seems like another slow boil happening there as well. Eventually crypto will be mainstream but until there are some guard rails installed its still like the wild west.
Now it turns out no accounting controls either
If you were an executive of the firm, the standards are different. https://www.wsj.com/articles/alameda-ftx-executives-are-said-to-have-known-ftx-was-using-customer-funds-11668264238 If you knew of the "irregularities" and didn't say anything, you are complicit.
No doubt what I would do , Ye shall know the truth and the truth shall set you free. Money is great to have, but if it means burying it off shore and sipping cocktails in Burmuda, like Corzine did, thanks anyways. What a loser.
The other guys, a wee bit better? Or not? Happy to do business with rogue states. TBF, there are a few money center banks that have about the same attitude. https://www.reuters.com/investigates/special-report/fintech-crypto-binance-zhao/
I think your hypothetical makes the decision analysis more complicated than necessary.
Presumably, you have a (mental) checklist for due diligence that must be satisfied prior to commitment to an investment--which (among other things) includes management oversight/supervision, internal controls, and transparency. Most of this is straightforward and would be common to/shared by all VC investors. Lacking a board of directors means none of these factors can be assured of fulfillment.
Do you really want to co-invest with others (irrespective of clubby network) who are willing to cut corners to overlook due diligence failure for the sake of a "hot" investment? (Isn't that Bill Gurley's point?)
Though, I think your main point is that investing requires discipline, especially when meeting fiduciary responsibilities.
It's been my impression that these failures haven't been a result of overlooking due diligence failures, but rather omitting due diligence altogether and proceeding on the word-of-mouth say-so of others. E.g., Theranos, using a high-profile advisory board, and Madoff's was clubby word-of-mouth.