Bloomberg News reports even before one of the cadres of Jane Street Group alumni dislodged FTX’s perch in the digital currency landscape in the present month, this firm on Wall Street had been enjoying status as a stalwart behemoth that very few people knew about.
The company boasts more than 2000 employees and is a powerhouse based in Lower Manhattan. It is known for its obsession with taking risks and its preference for stealth. It is known for digging into the trading partners‘ health, modeling probable catastrophes and autopsies losses, and preventing staffers from commenting in public because they might pose a danger. In a sentence, if the culture instilled by Sam Bankman-Fried developed in his company is the ‘Opposite.’
Recruitment that Led to the Downfall
As many stories are unraveling following FTX’s collapse, wherein the $32 billion crypto exchange is now in bankruptcy, it is now being found that the founder and leader had hired a few in his inner circle who were some of the most serious Wall Street employers as well as Silicon Valley for the haphazard operations.
It is also being said the inner circle included his romantic partner of one-time, Caroline Ellison, who used to run the Alameda Research investment company, aside from Brett Harrison, who oversaw FTX US. Gary Wang, the technology head, and chief Nishad Singh were from Google and Facebook, respectively. Constance Wang was earlier associated with Credit Suisse Group AG.
Failed Experiences and Efforts – Messy Accounting
Although the team comprises stalwarts in their fields, a growing heap of evidence reveals that risk controls and bookkeeping were not adequate and proper. Aside from the same, there were secret financial linkups with Alameda that surprised the investors. FTX is now amidst a criminal probe.
Even after spending three years at Jane Street, Sam Bankman Fried has never had a black mark, usually referred to in the industry as a “disclosure event.”
Modus Operandi
According to people familiar with the company’s way of operating, the moment a trader arrives, the company indoctrinates the traders with risk. It assigns a hefty slice of capital for hedging. Not only that, but it also maintains a doomsday trade in the case of a drop in the US stock market.
Authorities, including regulators and lawmakers, found in Bankman-Fried someone who could bridge the crypto world and Wall Street. He boasted that his company extended robust round-the-clock risk monitoring, and traders could see the same by checking its data.
Downfall Causes?
FTX, despite ascending faster, had ignored some of the conventions of Wall Street. As per the matter, documents and messages shared in FTX Slack channels at regular intervals got deleted.
It is also being said now that there were outsiders that roamed about in the office premises, especially those who belonged to the companies FTX was engaged in a deal with and would visit the office and hang around.
The outcomes differed between FTX and Jane Street. Revenues of Jane Street escalated by 54% in one year to $10.6 billion following the eruption of the pandemic due to Covid-19. However, when crypto prices dropped in the present year, and the disturbances with Alameda appeared, FTX nosedived and collapsed.
