Wednesday, November 23, 2022

Former Rep. Conaway CPA Lobbied for FTX

The former Chair of the House Ethics Committee and Certified Public Accountant Rep. Mike Conaway lobbied for FTX.   A filing showed Conaway Graves Group lobbied on the issues of:

Congressional and Executive Branch issues related to the formation of orderly digital asset markets.

Conaway Graves Group is likely listed in the legions of creditors seeking payment from the now bankrupt FTX.  

I would expect a CPA to ask two questions before taking on a client.  One, what is the makeup of the board of directors?  And two, who is the auditor and for how long?  A small insular board and no name auditor should've been red flags to an accountant.

Conaway used his accounting skills to sniff out a $1 million fraud at the National Republic Congressional Committee.  Something should have smelled bad at FTX.  CME Group President Patrick Duffy told CNBC he detected a fraud after meeting with Bankman-Fried.

Duffy's May 2022 testimony to a Congressional committee should have given Conaway doubts about representing FTX.  Snippets are below:

...FTX’s market maker and backstop liquidity provider plans imported from its offshore practices in low regulatory jurisdictions raises serious questions about the potential conflicts of interest embedded in the FTX model.

Finally, the FTX proposal eliminates critical customer protections. Under their model, market participants will lose important customer segregation protections and could be exposed to increased collateral investment losses.

...The FTX proposal is not innovation. It is an evasion of best practices and prudent risk management.

Here's what Conaway's client FTX founder Sam Bankman-Fried told that same committee:

(FTX) We also have strong customer protections under our model. It is a safe and conservative risk model which would have helped to alleviate some of the instances that we have seen with recent futures exchanges like the LME nickel fiasco earlier this year by having the collateral pre-funded at the clearinghouse rather than relying on credit, and having a real-time risk engine.

We also have enhanced customer protections. We have all of the customer protections that exist on traditional features exchanges and on FCMs because we understand deeply that we have a responsibility to ensure that if there is direct access to the platform, that users are still afforded the same level of protection. On top of that, we have further customer protections, suitability, and transparency than what you find on most other platforms.

Did Conaway Graves help write his testimony to Congress?  The public knows FTX customer protections were a bald faced lie, given Bankman-Fried siphoned off customer funds while running his  "personal fiefdom."

Update 11-24-22:  Conaway Graves cut its ties with FTX.  Both Red and Blue political teams received funding from FTX executives.

Update 11-25-22:  FTX could use a good CPA like Mike:

According to the company's lawyers, they have no reason to believe financial statements were ever audited. That means that no trained professionals from outside the company and its dozens of affiliates ever looked over FTX's books objectively, to ensure investors received truthful information.

Did Mike Conaway's team ask for an audit prior to representing FTX on Capital Hill?

The company "had a lack of corporate controls at a level that none of us in the profession that have looked at it so far have ever seen."

Mike may have seen something similar at the NRCC. 

Update 11-26-22:  Which flimsy excuse is true?  

Bankman-Fried blames "confusing internal labeling" for why billions in customer funds were transferred to Alameda.  

Bankman-Fried implies in an interview that he forgot about $8 billion in customer deposits.

Conaway couldn't sniff this one out. 

Update 11-30-22:  Just the group for a CPA to lobby on behalf of:

... a group of employees quit ...after becoming concerned about what they say was his (SBF) cavalier approach to risk, compliance and accounting.

Update 12-1-22:  Red flags Rep. Conaway missed:

FTX commissioned two different audit firms to audit its 2020 and 2021 financial statements. The reports by Armanino LLP, which signed the report for the U.S. operation, and by Prager Metis LLP, which signed the opinion for the offshore operations, were issued at the end of March 2022.

The first red flag anyone receiving these reports should have seen is that there were two different audit firms producing them. 

The second red flag for any reader of the 2021 audit reports is that neither the Armanino nor the Prager Metis audit reports for 2021 provides an opinion on the FTX US or FTX Trading internal controls over accounting and financial reporting.

SBF said he donated millions to Conaway's Red Team using dark money channels. 

Update 12-2-22:  More clues missed by Mike Conaway?  

FTX's interim CEO said that it was impossible to rely on any of the group's financial statements because it didn't have its own accounting department and was audited by a little-known firm that had an office in the metaverse. 

Update 12-19-22:  Another CPA Congressman Brad Sherman has been trying to ban cryptocurrencies in the U.S. for five years.

Update 12-20-22:  The New Yorker did a piece on lack of crypto regulation but failed to give CPA Mike Conaway his due as former Chair of the Ag Committee and FTX lobbyist..

FTX followed the standard playbook of influencing Washington, and that’s buying influence on a bipartisan basis

Just like the PEU boys. 

Update 1-4-23:  The last count in the indictment is an allegation that SBF conspired with others to violate campaign finance laws.  SBF made "enormous illegal contributions disguised to look as if they were coming from SBF’s “wealthy co-conspirators.” 

Update 1-8-23:  Institutional Risk Analyst reported:

The question is how state and federal regulators, as well as elected officials in both political parties, did not see that the entire construct of crypto currency was at best a form of money laundering and at worse outright fraud.