FTX crash causing its auditors to come into question

Summary:

• FTX had its 2021 financial reports audited.
• A run on customer deposits began the downfall of FTX.

The downfall of the FTX crypto

Two US accounting companies that the cryptocurrency exchange claimed it had hired to examine its books have come under scrutiny as a result of FTX's demise. FTX asserted that Armanino, one of the 20 largest accounting companies in the nation by sales, and Prager Metis, which bills itself as the first accounting company to open a headquarters in the metaverse, had audited its 2021 financial reports.

Even though the accounting regulations for digital assets are frequently ambiguous and businesses are still in their infancy, the two firms are among many in the US that have professed expertise in digital assets in a bid to seek business from the rising number of crypto enterprises.

Sam Bankman-Fried, the founder of FTX, hailed the audit of the company's financial results as a turning point last year, but neither the accounts nor the auditors' names were made public until the day before FTX filed for bankruptcy on Friday.

When Forbes magazine was putting together a ranking of cryptocurrency exchanges earlier this year, the publication claimed that FTX gave it "a trove of information on its operations, including most of the companies it did business with, when its last audits were, and details on its regulatory licenses." (FTX eventually came in sixth.)

FTX accounting firm is in the spotlight

Both accounting firms declined to comment on the extent of their work for FTX or the time since they last provided an audit opinion.

A run on customer deposits at its international exchange that followed revelations about the exchange's complex connections to other parts of Bankman-crypto Fried's enterprise brought down FTX. According to those acquainted with the company's finances, his trading outfit Alameda Research owing FTX $10 billion this week.

✕ FTX token price chart

Sources: finance.yahoo.com, ft.com