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If there were no corporate controls or trustworthy
financial information, how did those facts elude the big-
firm lawyers of the biggest VCs in the nation? I don't know
the answer, but I can think of three possibilities.

First, the due diligence didn't happen. Perhaps no one flew
to the Bahamas to meet with management of FTX and look
Legal ease: at their accounts and books. When crypto is going up, the
dubious privilege of investing is dangled before anxious
investors with the winning positions going to those who
invest the most, the fastest.

Think of the roulette wheel turning already and investors
being invited to place their bets or be left out altogether.

Second, the due diligence was done, but the lawyers
failed to notice the holes that Ray is now uncovering. In
my experience, large law firms are expert at traditional
FTX: Dishonesty, investments with fiat money in normal bank accounts
secured by normal assets, like buildings or listed equities.
Crypto, however, requires the investigating lawyer to
nothing legal to understand a bit more than fiat deal-making; it requires
the lawyer to understand how easy it is to fudge questions
see here of who owns what and where the value of assets are
actually placed.

By Adam Atlas Perhaps, the lawyers representing investors into FTX
simply didn't know what they were looking at and were
Attorney at Law therefore unable to provide effective legal advice to their
clients.
n the old days of crypto, individual investors lost
their assets. Now, the biggest VCs in finance have The third, and most likely possibility, is law firms
gotten their turn. This is no surprise. A particular representing investors into FTX saw there was nothing
I kind of fever builds up around what is thought to under the hood, but their VC clients—like gamblers in a
be a great investment in crypto. The projected returns are casino—insisted on investing all the same.
astronomical, the path to success is paved with unbreak-
able formulae, and investors are tripping over each other Why has the media not interviewed
to place bigger and bigger bets. a single lawyer in FTX?

The whole thing feels like a casino. FTX is just the latest and None of the traditional media like the Wall Street Journal,
largest of a string of crypto implosions representing—on The New York Times and others are running profiles on
my count—at least $800 billion in evaporated investments lawyers for investors in FTX. The investors are the cream
through platforms like MtGox, Celsius, Voyager Digital, of the crop of VCs such as the following (as reported in The
Three Arrows Capital, Terra Luna, Vauld, etc. Knowing New York Times, www.nytimes.com/2022/11/11/technology/ftx-
I've provided legal advice on crypto for almost 10 years, investors-venture-capital.html): Third Point Ventures, Tiger
The Green Sheet asked me to offer insights on FTX, from a Global, NEA, IVP, Iconiq Capital, Lux Capital, Mayfield,
legal perspective. Insight Partners, Sequoia Capital, SoftBank, Lightspeed
Venture Partners, Ribbit Capital, Temasek Holdings,
Which law firms did due diligence on FTX? BlackRock and Thoma Bravo.

Ironically, had a beginner ISO/payment processor Surely some of these large firms have something to say
underwriter been assigned to take a look at FTX—before to the fintech marketplace, if only a cautionary tale. I
pouring billions of dollars into it—they would have have written to the Wall Street Journal to ask this question
quickly spotted a problem. and haven't received a reply. Realistically, the law firms
advising these VCs are not allowed to talk about their
The new CEO of FTX appointed to oversee its bankruptcy advice because it is protected by lawyer-client privilege.
proceedings, John J. Ray, wrote in his filings, "Never in
my career have I seen such a complete failure of corporate Best legal can't beat fraud
controls and such a complete absence of trustworthy
financial information as occurred here, […]." As ISOs and payment processors know very well, the
best legal wording often cannot protect against a dishon-
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