Two observations on the FTX saga. The lack of ‘finance’ staff at FTX. And the Binance CEO’s reference to lobbying might have been misunderstood.

The fact that Sam Bankman-Fried (SBF) owned Alameda Research, the proprietary trading and market making company, as well as running the FTX exchange, was known from the start. Somehow, it was considered okay. But there was another major red flag.

If you take a look at the FTX page, it shows six senior members of the team: the CEO, the COO, two technology leaders, and two in compliance and legal. Something missing. For a company that manages billions of client funds, $16 billion according to the Wall Street Journal (WSJ), isn’t it strange that there is no chief financial officer (CFO)? Wouldn’t you expect it not only to have a CFO, but also one with some street credit?

It’s not definitive that FTX didn’t have a CFO, but our desk research failed to find one. Certainly not one that has a LinkedIn profile. We found a CFO for FTX US derivatives, but it came with the acquisition of LedgerX. And another in Japan, which has more advanced legal requirements following the collapse of the Mount Gox crypto exchange in 2014. Not only was there no CFO, there was almost no finance staff and the only person with “risk” management in his position is in the Japanese subsidiary.

Is it any wonder Sam Bankman-Fried (SBF) ended up with inaccurate data on leverage? He said that he thought it was zero when it was 1.7.

If the WSJ’s allegation that FTX lent SBF-owned market maker Alameda $10 billion is confirmed, a credible CFO could have avoided it or resigned under those circumstances.

And none of the venture capital backers, or even the BlackRock funds, wondered about the need for a CFO? You know, when the company deals with $16 billion of client funds. The Information reported that SBF and its companies invested in some of the venture capital firms that backed FTX.

Now, we don’t think Binance is an angel, but it does have multiple CFOs for the pool and regionally. Although last year his CFO left abruptly. Earlier this year, Kraken’s longtime CFO took on the role of SVP Finance at the beginning of the year, and Kraken is seen as one of the more conservative exchanges.

Was SBF lobbying behind someone’s back?

On Sunday, Binance CEO Changpeng Zhao (CZ) made two shocking tweets. One said that Binance was selling its FTT token holdings. And a second comparing FTX/FTT with the failed Terra/LUNA saga.

That second tweet he also stated, “we will not support people who lobby other industry players behind their backs.” This may have been misunderstood.

Bankman-Fried has become wildly unpopular in recent weeks for supporting the Digital Products Consumer Protection Act (DCCPA) legislation. Many see this as a restriction of decentralized finance (DeFi).

CZ’s lobbying statement was widely interpreted as referring to the DCCPA problem.

But it is conceivable that there is something closer to home. The DCCPA’s views on SBF were extremely public and not behind anyone’s back.

In February, the Wall Street Journal reported that Binance.US was under investigation by the SEC. It alleges that, similar to how FTX and Alameda have a relationship, Binance.US has a market-making relationship with two CZ-affiliated entities, Sigma Chain AG and Merit Peak Ltd.

We are now entering the realms of speculation. But maybe CZ thinks the SEC was tipped off about this. Particularly given SBF’s knowledge of the market making space. Also, Crypto Twitter is reading a lot about the fact that FTX US General Counsel reported directly to Gary Gensler when Gensler was running the CFTC. Gensler currently chairs the SEC.