Crypto Becomes the One Sector in Which Auditors Will Not "Work for Food"

Crypto-Land –- The Accountants Discover That It’s Terra Incognita

With the spectacular flame-out of Sam Bankman-Fried’s crypto exchange FTX, the Armanino and Prager Metis firms have been sued over their audits of its US and international operations; Mazars pulled its “proof of reserve” report on Binance and cut ties with other crypto clients; BDO displayed its anxiety over its crypto client work; the Big Four sit in the background with little show of appetite for crypto’s possibly terminal disruption.

That the crypto sector could be revealed as so toxic as to repel the gate-keepers of the capital markets might once have been beyond imagination –- it long having been an insiders’ wry one-liner that the short wording of a Big Audit engagement letter was, in its entirety, “Will work for food.”

Yet the profession’s retreat from crypto’s trackless wilderness suggests two propositions:

–There actually are activities beyond the auditors’ capability to provide assurance within the standards developed since the invention of independent audit in the Victorian era.

–There actually are enterprises whose plans, strategies and operations, and their management competence and ethos, are so deviant as to make them unsuitably risky as clients.

In the Bahamas, a Lingering Sympathy for Sam Bankman-Fried

Yet in interviews across the island Mr. Bankman-Fried called home for just over a year, residents almost universally said that while the white-collar nature of his crimes was troublesome, they were hardly comparable to the gang violence that pervades some corners of the island. They expressed fears of economic fallout for the island if he and the other cryptocurrency brethren he attracted didn’t return.

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As the self-appointed standard-bearer for the crypto industry at large, Mr. Bankman-Fried was working to diversify the economy of an island that has long looked to expand beyond tourism, and that was punished by the decrease in visitors caused by the Covid-19 pandemic. He helped organize a spring crypto conference that brought in hundreds of well-heeled visitors. At Albany, the oceanfront compound where he and his associates lived, they were known as generous employers; one delivery driver said he was tipped more than $100 to take a modest Burger King order to a cryptocurrency investor there.

SEC Climate Rules Face Bipartisan Heat Over Farming Emissions

The SEC faces pressure from Congress to curtail its plans for big companies to disclose their suppliers’ greenhouse gas emissions amid mounting bipartisan concern that the reporting burden would ultimately fall on small and independent farmers.

Dozens of Republican and Democratic lawmakers have asked the Securities and Exchange Commission to give large companies clearer legal liability protections to estimate emissions from small farmers in their supply chains-–or to exclude agriculture from the planned disclosure requirement altogether. Farm groups, as well as Tyson Foods Inc., Walmart Inc. and other companies that rely on independent farmers and ranchers for their products, have criticized the plan to the SEC, whose chair, Gary Gensler, has disputed any burdens on small companies.

This little-known firm with a weird website was central to the misappropriation of FTX customers’ money, regulators sayAmong the 130 or so companies in Sam Bankman-Fried’s sprawling crypto empire, North Dimension Inc. assumed a low profile. Unlike FTX, its name wasn’t splashed on billboards or sporting arenas, and its business wasn’t promoted by celebrities.

Still, North Dimension had a crucial role in the FTX mess, regulators now say. In fact, they contend, the little-known company was central to the furtive misappropriation of FTX customers’ funds.

As a subsidiary of Alameda Research, the crypto hedge fund and trading firm also founded by Bankman-Fried, North Dimension was where FTX customers were told to wire money if they wanted to trade on its exchange, according to a complaint filed Wednesday by the Securities and Exchange Commission.

But North Dimension Inc. also appears to have been a fake online electronics retailer, an NBC News investigation found. Its website, now disabled, is archived on the internet.