So, have you heard about the collapsed cryptocurrency exchange FTX? Apparently, the founder, Bankman-Fried, either lost $8 billion worth of liabilities by accident or deliberately scammed people out of their money. Talk about a tough decision – feckless man-child or coldblooded con man? It’s like choosing between cake and ice cream – why not have both?

Now, I’m not saying that irresponsible people shouldn’t be held accountable for squandering money and trust, but robbing people intentionally is a whole different ball game. We need to figure out which bucket Bankman-Fried belongs in to prevent future disasters. A catastrophe of incompetence needs tighter rules for investing money, while a catastrophe of criminality needs more ferocious enforcement. Hopefully, he doesn’t fall into both categories – that would be a whole new level of disaster.

According to a report from the FTX bankruptcy proceeding, Bankman-Fried might be a little bit of both. The report reveals that Alameda Research, an FTX affiliate, was “unauditable” due to its lack of financial reporting procedures and risk management controls. Apparently, Bankman-Fried didn’t see this as a big deal – his team often found $50 million lying around like lost change. Who needs to keep track of money when you can just wing it, am I right?

But let’s not give accounting a bad rap. It’s a more philosophical discipline than you might imagine, and a lack of basic components like a record of transactions or an accurate estimate of current balances is not something to take lightly. The FTX group should have hired a better accounting firm – one that wasn’t too small or unspecialized to oversee the mess Bankman-Fried had created.

To make matters worse, senior management – or what passes for it – was repeatedly warned of potential problems with their slapdash approach. Still, they preferred it that way, and if the report’s allegations are correct, they repeatedly made false statements about important matters. It’s like a high school kid who doesn’t see the point of the rules, except they’re running a business worth billions.

Now, you might think that Bankman-Fried was a slick operator, but the truth is that storing the company’s crypto in “hot” storage, where hackers could steal it, was a basic error. Why not store it in “cold wallets” walled off from the internet? And why leave the keys to some of those wallets unencrypted or on servers accessible to lower-level employees? These mistakes reek of incompetence rather than something more nefarious – like intentional fraud.

The bottom line is that the FTX disaster should trigger some serious soul-searching. In a better world, people wouldn’t behave so irresponsibly, but it also wouldn’t be possible for someone this stupid to accumulate the kind of money and political influence that Bankman-Fried had. One thing’s for sure – if the allegations are true, he and his associates should spend some serious time in jail. Because no matter how you slice it, incompetence is no excuse.

Serious News: washingtonpost