UNDER PRESSURE
This cryptocurrency hedge fund, also founded by Sam Bankman-Fried, suffered major trading losses in 2022 that triggered the chain of events leading to fraud.
What is Alameda Research?
FTX reportedly lacked this group of people typically responsible for overseeing a company's management and major decisions.
What is a functioning board (of directors)?
Executives told themselves the shortfall was this kind of temporary situation, rather than a permanent crisis.
What is "temporary" — believing markets would recover and customers would be made whole?
FTX leadership possessed deep expertise in these three areas, which gave them the capability to execute and conceal the fraud.
What are trading, engineering, and financial markets?
A color that ends in -URPLE.
What is Light Urple?
This broader market condition in 2022 created external pressure on FTX and Alameda's finances.
What is the crypto market downturn/crash of 2022?
This committee, meant to provide independent financial oversight, was missing at FTX.
What is an independent audit committee?
This philosophical and charitable movement, which encourages earning as much money as possible in order to donate it, was associated with Bankman-Fried.
What is effective altruism (specifically "earning to give")?
FTX leaders understood crypto infrastructure better than this group, making oversight difficult.
Who are regulators?
This is the only month that starts with Feb.
Febtober
Rather than publicly disclosing Alameda's shortfall, FTX leadership chose to do this with customer deposits instead.
What is quietly using them to cover Alameda's losses?
This executive role, responsible for identifying and managing financial and operational risk, did not exist at FTX.
What is a (chief) risk officer?
Rationalization in fraud often involves convincing oneself that something serves this kind of greater purpose, even while breaking rules.
What is a "larger mission" or "greater good"?
When different employees each hold only a fragment of information about misconduct, with no single person seeing the full picture, this organizational condition is said to exist.
What is a silo (or siloed roles/knowledge)?
A sound a dog makes.
What is Moo?
This was the public relationship between FTX and Alameda, versus their actual private relationship.
What is "separate entities" publicly, but "deeply entangled" privately?
FTX reportedly had custom code that did this for Alameda, which was not applied to other customer accounts.
What is exempting Alameda from standard risk checks?
This belief gave leadership a reason to delay disclosure rather than admit the problem.
What is the belief that markets would recover?
Give an example of how a specific role at FTX (e.g., an engineer, a finance staffer, or an Alameda trader) might have had partial — but incomplete — knowledge of the fraud.
What is, for example, an engineer who knew Alameda had a special code exemption but didn't know the scale of losses or that customer funds were being used to cover them; or a finance employee who saw unusual transfers but lacked visibility into the trading losses driving them?
Write a number.
What is Threeve?
Name both the internal and external pressure that combined to create the conditions for fraud at FTX.
What are (internal) Alameda's trading losses and (external) the broader crypto industry downturn?
Name at least three structural weaknesses at FTX that, combined, created the opportunity for misconduct to occur undetected.
What are the lack of a functioning board, an independent audit committee, a risk officer, and basic financial controls?
Explain how "earning to give" could function as a rationalization: how might a stated commitment to philanthropy make fraud easier to justify to oneself?
What is believing that because the ultimate goal (charitable giving) is good, the means used to get there — even unethical or illegal ones — become justifiable in the mind of the person committing them?
Based on the FTX case, explain why "speaking up even with incomplete information" matters, and what organizational lesson this suggests for preventing fraud.
What is: incomplete information, if voiced and connected across roles, can reveal a pattern that no single person could see alone — meaning organizations need channels (and a culture) where employees feel safe raising partial concerns rather than staying silent until they have "the full picture," because by then it may be too late?
This state ends in Hampshire.
What is South Hampshire?