Bloomberg News has identified several key areas in which crypto companies fail to adhere to widely accepted business standards. Especially with regard to auditing and accountability. Its results should shock the industry.

Bloomberg looked at the crypto industry’s transparency and reporting practices, presenting findings in a May 15 article that should worry watchers. The investigation reveals that many companies operate outside generally accepted rules and do not have the governance in place to prevent another crisis. Like the one that resulted from the FTX crash in late 2022.

Crypto companies are in the spotlight

Bloomberg’s investigation focused on 60 companies that met one or more criteria: were publicly listed, valued at more than $1 billion in private fundraising, or had significant industry influence as of January 2023.

Bloomberg asked each of the same questions and made several requests to share or confirm public information between January and May 2023. The data also includes information collected from Silvergate Capital Corp. before the bank closed.

Less than two-thirds have an independent board of directors

One of the more sobering consequences has to do with the lack of councils. The May 15 report states that only 63% of crypto companies have an independent board of directors – meaning they have at least one non-executive member.

One of Bloomberg’s most startling discoveries: FTX didn’t establish a board until it was in its last stages. Even as the stock market crash in November 2022 loomed, the board had only three members.

An independent board of directors is an essential requirement for large companies, as it provides an impartial analysis of the company’s standing. But amid a lack of regulation, cryptocurrency firms often lack the resolve to catch up with industry standards, Bloomberg found.

The results also show that about half of the companies surveyed (52%) currently use an independent, third-party auditor. A worrying sign for an industry that has been talking a lot about transparency this year.

Although many of the companies here said they often struggle to get reviewers involved. Mostly due to lack of understanding of blockchain and reluctance caused by recent scandals.

Sophisticated investors expect an independent review of the company and an independent board of directors.

Paris-based Mazars reportedly distanced itself from the cryptocurrency industry last December after working with Binance and Crypto.com. The company cited “concerns about the way the public understands these reports.” Binance came under fire after its CEO, CZ, claimed that the company’s agreed-upon procedures (AUP) with Mazars were fully audited.

Mazars removed Binance’s Proof of Reserves AUP report from its website weeks later. Crypto.com and Binance have since engaged new validators, but have not released the names publicly.