FTX, Nexo Auditor Armanino To Quit Crypto After 8 Years: Report

Armanino, the auditing firm who spearheaded proof of reserves, is reportedly giving up its crypto clientele amid the FTX scandal.


Blockworks exclusive art by Axel Rangel modified by Blockworks


Armanino, the auditing firm for a string of prominent crypto companies including FTX US, is said to be exiting the space after eight years. 

The California-based auditor will quit crypto and give up its clientele, Forbes reported on Thursday, citing two sources familiar with the matter.

FTX, which frequently endorsed regulation and claimed its financials were audited, hired Armanino to keep its US arm in check, having reportedly performed its 2020 and 2021 audits and found no glaring problems.

A separate accounting firm, Prager Metis, worked on FTX’s flagship global exchange headquartered in The Bahamas.

Armanino began servicing crypto clients in 2014 and had become one of the sector’s most well-known auditors. Crypto exchanges Kraken and Gate.io, as well as lenders Ledn and Nexo, were among its customers alongside FTX US (Nexo first passed Armanino’s “real-time audit” last September).

Armanino had spearheaded crypto exchange “proof of reserves” reports by launching a crypto holdings assurance portal in 2020, which allows users of certain platforms to confirm the status of their digital assets. 

The reports have however faced criticism for relying on company-provided data and absent liabilities.

Mazars, another auditing firm that supported proof of reserves for platforms including Binance and KuCoin, is also pulling out of crypto.

Armanino named in class-action lawsuit with FTX CEO Bankman-Fried

Armanino is yet to address Forbes’ report, but the outlet suggested that its more traditional clients may be concerned about reputational risk in light of the FTX scandal. Blockworks has reached out for comment.

Without naming Prager Metis or Armanino, new FTX CEO John Ray said in a bankruptcy court declaration that FTX’s former audits should not be trusted. 

Ray added FTX’s record-keeping was so careless that advisers “have been unable to prepare a complete list of who worked for the FTX Group as of the petition date.” 

Armanino was also sued in a class-action filed last month with former FTX CEO Sam Bankman-Fried, Prager Matis, as well as FTX insiders Caroline Ellison and Gary Wang. 

Plaintiffs claimed Armanino failed to meet its professional obligation to ensure FTX wasn’t engaged in malpractice. The firm was “wilfully blind” to FTX’s pattern of alleged racketeering, said investor Stephen Pierce, who lost about $20,000 in the exchange.

Reuters reported that FTX had funnelled $10 billion in user funds to Alameda over the years via a secret software “backdoor.” This alleged backdoor allowed the smooth movement of funds without alerting third parties, like auditors.

Updated Dec. 16, 2022 at 2:16 pm ET: Added context, Nexo first passing Armanino’s “real-time audit.”

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