A survey of 60 major crypto companies in Q1 on the state of governance and controls finds many operate outside the norm; around half engage an external auditor
Before it filed for bankruptcy last November, many of the entities in Sam Bankman-Fried's colossal FTX empire had never held a board meeting.
Context & Ripple Effects
The survey quantifies what FTX's bankruptcy made visceral: many entities in Sam Bankman-Fried's empire had never held a board meeting, and a debtors' report on its control failures documented recordkeeping and key-storage practices far outside any professional norm.
The Q1 data lands in an ecosystem already repricing trust — US auditors have been labeling crypto clients “high risk” since FTX's collapse, lengthening audits, raising fees, or dropping them outright — so a finding that only around half of 60 major firms even engage an external auditor reads as a map of who is still exposed.
First-order effects
- The roughly half of surveyed firms operating without external audits face immediate pressure from investors, lenders, and counterparties who now treat auditor engagement as a baseline credibility test post-FTX.
Second-order effects
- Audit demand from the un-audited half collides with an auditor base already shrinking or re-pricing crypto work as high-risk, pushing fees up and concentrating remaining audit capacity among firms willing to serve the sector.
Third-order effects
- If the pattern holds, board meetings, independent directors, and external audits shift from optional hygiene to market-access requirements — the informal norm-setting regulators like the SEC and CFTC, already probing how customer funds were handled at FTX.com, would formalize into rules.
The trend: Crypto is moving from self-declared governance to externally verified controls, with FTX's failure converting audit engagement from differentiator to entry ticket.