The lawyer doubted the proper examination of investments in FTX
Investors in the bankrupt exchange of FTX ignored the warning signals contained directly in presentations to rounds. This conclusion was reached by Simmons partner & Simmons George Morris, reports The Block.
The list of large investment firms affected by the collapse of the crypto company is growing. The day before FTX submitted and affiliated structures of insolvency statements in Sequoia Capital marked investments of $ 213.5 “bent”.
On November 17, Singapore Temasek Holdings announced that he wrote down investments in the exchange and its American branch in the amount of $ 275 million.
At the request of the publication, Morris studied FTX presentations for investment rounds. According to the lawyer, forecast statements in them are not backed up by “viable assumptions”.
The expert drew attention to the inconsistency of the declared income for 2021 and 2022 and planned indicators of trade and fees. In his opinion, these figures are “definitely in no way”.
Morris also indicated the cost forecast, which include rent, salaries and marketing. In the presentation for the series of the series, the company estimated them at $ 7.65 million for the whole 2022. The expert noted that this approximately corresponds to the indicator for the company with 100 employees, and the FTX announced the number of staff of about 300 people.
Pure profit forecast for $ 327 million.
“The costs that reinforce such profitability look underestimated,” Morris believes.
He also emphasized two more points: the lack of regulatory clarity in FTX statements and the hasty nature of raising funds.
The lawyer believes that the first point especially earned the attention of investors, since the exchange in the presentation announced the active sentence of derivatives to retail investors. Such products are subject to strict regulation in the United States, he recalled.
“It is worth noting that the round schedule was extremely short – the booklet was released after February 6, 2020, the proposals were accepted until February 20, and the closure on the last day of the month,” Morris said.
Such a schedule leaves “there are little chances to properly conduct Due Diligence,” the lawyer emphasized.
Due to the outbreak of pandemia Covid-19, the exchange completed the round of financing the series in July 2021, collecting $ 900 million. In the initial presentation, it was about $ 50 million.
ACCEL Venture company, Andrei Bratsovyan, in a comment for The Block, noted that against the background of a bull rally, the investment market in cryptostarta was then “super -junction”. According to him, those who wanted to invest in the industry were constantly in the “catching up” mode.
The ex-head of the venture unit FTX Amy Wu previously noticed that often the terms of the transaction were then agreed within a day.
Recall that the managing partner of the Hack VC investment company Alexander Pak spoke about the “catastrophic” tendency to the risk of FTX founder Sam Bankman-Fried.
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