Large organizations and foundations are generally organized on two principles:
- A board of independent directors at the top, who are not beholden to management
- External auditors who come in and verify everything is as it should be, regularly reporting to the board
That’s how all US public companies operate, and many private ones as well.
Guess who doesn’t operate that way?
Crypto firms.
A new report reveals that even after the FTX crypto bomb, crypto companies have shockingly poor standards:
Around half of the businesses surveyed currently engage an independent auditor to assess their finances, the findings showed. Meanwhile, 63% of the companies had an independent board of directors – meaning that they had at least one non-executive member. Nearly all of the 60 firms surveyed have raised outside investment since their founding, according to PitchBook or other publicly available information.
So half these firms don’t have any external auditor and more than a third have no independent board.
When a company doesn’t have an external auditor, that means all of their reports are based on the honor system…and in large organizations with many different people and tons of money moving around, that’s a horrible system.
If you read further, you’ll find that many of these firms are not using the “Big Four” auditing firms but other, less known, and perhaps less proficient accounting companies. And there’s drama:
Some audit firms have grown wary of working with the industry. French-headquartered Mazars Group, which previously provided reports that vouched for assets held in reserve by exchanges Binance and Crypto.com, halted all such work in December citing “concerns regarding the way these reports are understood by the public.” Both Binance and Crypto.com have since engaged new auditors, according to spokespeople for the companies, who declined to disclose which ones.
This new age of financial transparency is sure off to a weird start.
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I also enjoy using LEBs! I have an empire of little guys for VPNs, larger guys for apps, and big guys for databases and storage. When I'm not in front a screen I'm into German Shepherd dogs, quality knives, target shooting, theology, tabletop roleplaying games, and forest hiking.
I enjoy writing technical articles here on LowEndBox to help people get more out of their systems. You can find me on LowEndTalk @raindog308
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