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Comment by hn_throwaway_99 | Hacker News Reader

> Are you in the finance function at your startup?

Yes, I am. I'm in engineering but I have to work closely with our accounting team to make sure all the numbers add up and, importantly, that everything is auditable, and I built the systems to do this.

I'll let Matt Levine say it better than I can. What passed for financial tracking at FTX (which was a financial company) is beyond disgusting. FTX had a "hidden, poorly internally labeled ‘fiat@’ account, with a balance of negative $8 billion. The result of adding or subtracting those numbers with ordinary numbers is not a number; it is prison."

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By the way, what the hell is a fiat@? Is that at-sign a typo or is it some kind of jargon I don't understand?

I'm guessing it's fiat@[Alameda], but I have no clue.

It's probably meant to account for cash at a bank somewhere or cash they are 'holding' for someone.

Then you are almost certainly an outlier, and it's nice to see. If I may ask, how old is the company? While the accounting situation at FTX appears to have been a disaster, it just doesn't seem out of the ordinary for a 2 year old company.

What does negative $8 billion mean in the context of double entry? Matt says clever sounding things that don't add up sometimes..

No, we are not an outlier. Nearly all fintechs that work in traditional finance must have these controls in place, because otherwise nobody else will do business with them. E.g. you've got to have SOC 2 or ISO27001 compliance (or some other standard) for counterparties to even pick up the phone to do business with you.

I don't mean to be rude, but you seem very unaware what standards are in this space. (Or rather, I should say the financial space, as everything seems to be a shitshow in crypto). You seem to be conflating what, say, some social media platform or todo app startup needs to do for compliance vs. a financial company.

FTX was in the business of handling other people's money, and they can't even say where billions of dollars have gone. If you think this is just normal "startup chaos", please, please, please don't ever work in a financial startup.

Without naming names, there are specific well known fintechs who were not SOC or ISO compliant when they were 2 years old. And SOC compliance is self determined anyway I believe. Plenty of people did business with them because their customers were small businesses (mostly startups) who didn't think about such matters. These were/are good companies, doing the right thing, but not doing things they didn't need to do.

Plenty of businesses did business with FTX. The things large enterprise want in a vendor or counterparty are generally not a consideration outside large enterprise. I used to be involved with oil price hedging where our counterparties were small/mid sized oil and gas producers - it didn't even occur to them that they were taking credit risk on us or that they should know if we had a credit rating.

> While the accounting situation at FTX appears to have been a disaster, it just doesn't seem out of the ordinary for a 2 year old company

FTX is 3.5 years old, and Alameda is 5 years old.

> What does negative $8 billion mean in the context of double entry?

"We're supposed to have $8 billion in this account but we don't."

Combining various sources of information and reading between the lines, the most likely explanation is that this is the Alameda account that FTX customers were depositing money into, which then got gambled away by Alameda instead of transferred to FTX.

I've never worked at a startup but I strongly question the idea that "Whoops we had customers send $8 billion to the wrong company and gambled it away instead of collecting it" is not out of the ordinary.

What startup deliberately builds back doors to siphon away customer funds with the knowledge of only the founders, and deliberately misleads internal finance folks.

Who "lends" customer funds without any documentation to let founders buy multi million dollar property in their own personal names

This isn't messy, move fast break things of a startup, it's fraud

It seems so, yes.

But the bankruptcy ceo claims the lack of controls is unprecedented. It isn't. Even good guys building good companies have a lack of controls in place in the early days.

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