FTX US examiner Armanino defends work for failed crypto exchange

The FTX's bankruptcy auditor said that he was standing for his work for Sam Bankman-Fried and is proud to have provided services for a cryptocurrency industry that must improve trust and transparency, but he would give up his practice for digital assets until the end.

In the first interview with a head of the Armanino auditing company since the collapse of FTX last month, the Chief Operating Officer Chris Carlberg said that the "market conditions" had changed and that the provision of annual financial statements and so -called reserve certificate reports.

The Armanino based in California issued a perfect health certificate to the annual financial statements 2020 and 2021 by FTX US, a branch by the Bankman fried crypto empire, which offered the trade for US citizens. FTX US broke into bankruptcy last month together with FTX's larger international stock market business.

Carlberg said that Armanino had "never a customer relationship" with Alameda Research, the crypto hedge fund of Bankman-Fried, or the larger international stock exchange business from FTX, where the former billionaire is said to have cheated by billions of dollars.

"We are definitely on the work of FTX Us," said Carlberg. "Some votes from the industry said that we should have done better work when examining internal controls, but we were never commissioned to check internal controls. This happens to public companies. It is not required by the standards for the examination of US private companies."

FTX court files have described a spacious group of companies in which the accounting was often chaotic and internal controls were poor. John Ray III, the expert who was brought in to lead the companies through bankruptcy, said that one should not rely on previous annual financial statements.

industry standards only require that examiners of a private company understand the internal controls of a company and plan their examination accordingly. "The team dealt with the analysis that is required by the standards on this topic," said Carlberg, "and we feel good again with the work we did in this area."

Armanino and the auditor of the international business of FTX, Prague Metis, faces a lawsuit by FTX customers, in which it is claimed that "they were ruthless or deliberately blind". Carlberg refused to comment on the lawsuit.

Armanino is one of the 20 largest auditing companies in the United States with a turnover of around $ 500 million last year, according to Accounting Today, and more than 200 partners. It has also developed into a leading provider of proof-of-reserve reports for crypto ventures, a controversial product that is intended to prove the security of customer funds, but does not do justice to a complete final examination that Armanino FTX US has provided.

The supervisory authorities have questioned the value of the product, which is only a limited snapshot of the true financial health of a crypto company. Mazars, another auditing company, said last week that she would hire the provision of such reports and pulled the work that she had done for the Krypto exchange Binance back from her website.

The nine-member Armanino team, which reports to prove the reserves, will leave the company and found a new unit to take over existing customers, whereby the separation should be completed by the end of the next month.

"Given the major changes that have occurred on the cryptom market in recent months, every professional service company has to adapt and re -evaluate," said Carlberg.

Digital Assets practice accounts for less than 1 percent of the company's income, but has attracted unwanted attention since the collapse of FTX, among other things by reappearing news from his Twitter account, in which Bankman-Frieds appears before the US Congress.

"Our partners and our company are proud of the work we did in this area," said Carlberg. "Additional trust and transparency is needed."

But he repeated Mazars in the warning of the risk that the detection of reserve certificates will be misunderstood by investors. "There is still a fairly large gap in understanding between what an exam or an offer to prove the reserve offers the recipients of these reports. Hopefully this gap in understanding will change over time, but today it is quite great," he said.