A thread on Prime brokers & Genesis (5 minute read)
Genesis, the only full-service prime broker in crypto, has halted withdrawals from its lending unit. A prime broker is similar to a brokerage firm, except that it works with large, sophisticated institutions. Prime brokerage businesses are attractive fee machines, as long as certain conditions are met. Otherwise, they become fragile businesses prone to counterparty risk, bank runs, and asset-liability mismatch. Genesis has likely lost unless it can raise equity or get acquired.
How bad were FTX's internal controls? (3 minute read)
This Twitter thread presents some of the worst examples of FTX's internal controls from the company's bankruptcy court filing. Examples include employees submitting expense reimbursements over chat, related party loans, a non-existent cash management system, and insufficient documentation of employee records. Customer funds were not recorded on the balance sheet and were likely all put into a general central slush fund.