FTX Venture Capital Investors Are Facing Serious Questions

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Last Updated on January 22, 2023 by Bitfinsider

A Commodity Futures Trading Commission official said the demise of Sam Bankman-Fried’s FTX crypto business raises “serious issues” about how carefully venture capitalists and money managers evaluated his operations before investing client cash.

Such concerns arise when a fund entrusts millions of dollars and then needs to write it off totally a year later, according to the regulator. She also cited statements made by John J. Ray III, who took over as CEO of FTX as part of the company’s bankruptcy and has subsequently characterized a lack of record-keeping and essential controls when he was appointed.

Given the interconnection of the crypto business, Goldsmith Romero believes it is worth exploring if backers may have had possible conflicts of interest.

“What kind of due diligence did they conduct?” Commissioner Christy Goldsmith Romero said Friday in a Bloomberg Television interview. “Why did they turn a blind eye to what should have been really flashing red lights?”

“Were there any conflicts that kept them from paying attention to the due diligence and facts that they were uncovering?” she asked.

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