crypto strategy

Most CFOs Never Liked Crypto, Even Before FTX Collapsed

Crypto is unregulated and volatile. Its true value is ephemeral. Investing in it is risky. In other words, for most CFOs, this is a nightmarish combination they’ve been trying to stay away from. (More CFOs don’t want to put it on the balance sheet.) Which made the collapse of the FTX exchange both a financial horror story and an “I told you so” moment.

Last week, FTX, one of the world’s largest cryptocurrency exchanges, once valued at $32 billion and run by 30-year-old Sam Bankman-Fried, collapsed. Bankman Fried filed for bankruptcy, and he resigned as CEO. The 30-year-old was a crypto star, championing crypto on Capitol Hill and building high profile business partnerships. For example, in October, Visa announced a long term global partnership with the company planning to expand Visa debit cards linked to the FTX account to 40 new countries.

“The situation with FTX is unfortunate and we are monitoring developments closely,” a Visa spokesperson told me via email. “The focus on security and trust remains paramount.” The company is working to implement controls for the existing FTX.US Visa card program in the United States, and plans for additional card programs with FTX in other countries are temporarily on hold. “The market uncertainty does not change our view that digital currencies and the underlying crypto technologies have great potential for the future of financial services,” the spokesperson said.

FTX leadership structure

It is not known if FTX has a CFO. When I look at the management team, there are none in the list. I asked Dan Ashmore, crypto analyst at Invezz, a London-based investment fintech, about its assessment of the company’s leadership. “The FTX collapse was unique in that it stemmed from the entangled relationship between the exchange (FTX) and the trading company, Alameda Research, both founded by Sam Bankman-Fried,” Ashmore told me. “There’s a reason there was no CFO at FTX – because the leadership structure was very unusual, given that Bankman-Fried basically made all the decisions for both companies.”

FTX was “notoriously thin, with an employee count of just 75, even though it grew so rapidly, being valued at one point at $32 billion,” Ashmore says. “It pales in comparison to the rival exchange Coinbasewhich had more than 6,000 employees before laying off 1,100 earlier this year.

Due to a heavy workload, former Alameda co-CEO Sam Trabucco stepped down earlier this year, he says. “That only left Caroline Ellison, co-CEO of Alamedaand Bankman-Fried as top executives, although the latter was by far the number one,” Ashmore says.

FTX’s “debacle” can be attributed in part to a “tailor-made management structure and lean workforce” with most legal and compliance teams would have resigned, he explains. “There is no doubt that the aggressive leadership, concentrated power structure and entangled relationship between FTX and Alameda could have been brought under control by a more conservative and cautious management structure,” he says.

“Bad internal labeling”

An onboard finance team could have provided the financial clarity Bankman-Fried needed when labeling bank accounts, for example.

“The full story here is one I’m still fleshing out every detail of, but on a very high level I messed up twice,” he wrote in a tweet Last week. “The first time around, poor internal labeling of bank accounts meant I was significantly off my sense of user margin. I thought it was much lower.

In an analysis, The wealth Tristan Bove writes“He claims that due to this mislabeling his leverage was 0x when it was actually 1.7x and his feeling was that he had 24 times the average daily cash withdrawal amount so that he actually only had 0.8x. In other words, he was more in debt than he thought and had less money to cover it than he thought – much less. when about $5 billion in withdrawals were made on Sunday, it ended up here.

Assessing CFO sentiment on crypto, bank CFOs are in no rush to implement it. The US Federal Reserve Board Survey of Senior Financial Officers was distributed to 80 banks. According to results released in May, two-thirds of respondents said distributed ledger technology and crypto-related products were not a priority or a low priority in their bank’s growth and development strategy. over the next two years.

One thing is certain: CFOs who were wary of crypto before are probably feeling even more cautious now.


Until tomorrow.

Sheryl Estrada
[email protected]

Big deal

Deloitte recently published its 2022 global corporate cash survey. Organizations are taking action to address liquidity management, financial risk, business continuity and operating model priorities, Deloitte found. “With 54% positive votes, improving liquidity risk management is considered the most critical mandate given to treasury departments by the board or CFO,” according to the report. Another key finding is that organizations are planning for greater automation in several areas of treasury. Over the next two to three years, the top three areas respondents said they expect to become more automated are cash flow forecasting (78%), cash management (74%), and foreign exchange and interest rate risks (64%). The results are based on a survey of 245 treasurers from all industries, with most participants coming from the consumer and industrial products industry.

Courtesy of Deloitte

Go further

Is there a better way to recruit temporary teams?A report in Wharton’s Business Journal, suggests a new strategy for staffing high-performing work teams by focusing on member relationships, not just their skills. Hummy Song, Operations Professor , Information and Decisions at Wharton, is the co-author of research on team composition in hospital emergency rooms that balances both learning and efficiency.” We examine these potential levers that have to do with team composition, especially team familiarity and partner exposure. How important are those things when it comes to performance?” Song told Wharton.

Ranking

TuesdayCFO and EVP at Ultragenyx Pharmaceutical Inc. (Nasdaq: RARE), is leaving the company effective November 15. She will assume the dual role of chief financial officer and chief business development officer at Acelyrin, Inc. Ted Huizenga, chief accounting officer, and Aaron Olsen, senior vice president of strategy and finance, will lead ongoing financial activities while searching for a successor . Dier joined Ultragenyx in October 2020.

Chris Sousa was appointed Chief Financial Officer of JPA Health, a Washington, DC-based marketing and communications firm Sousa brings nearly 20 years of experience. Prior to joining JPA, he spent over 14 years at Dataprise, where he led five acquisitions. He previously held operations and systems roles at Radical Support, StrategicFusion and Technical Systems Integrators.

Understood

“A lot of people compared it to Lehman. I would compare it to Enron.”

-Harvard professor and former Treasury Secretary Larry Summers commented on the downfall of FTX, the once-heralded crypto exchange, on Bloomberg Television. Wall Street Week. Summers referenced “The Smartest Guys in the Room,” the classic documentary that revealed how Enron kept a fake set of books before its own spectacular implosion, Fortune reported.

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