Former Accounting Team of FTX US Auditor Armanino Sets Up Shop as The Network Firm

The episode highlights yet another chokepoint for the blockchain industry: It's become harder for crypto startups to enlist big accounting firms to do audits and asset attestations.

AccessTimeIconMar 1, 2023 at 1:53 p.m. UTC
Updated Mar 1, 2023 at 5:56 p.m. UTC
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Members of the accounting firm Armanino’s digital-asset practice have departed and formed a startup – The Network Firm – to carry on the business of providing audits, attestations and related work for crypto clients.

The move, confirmed to CoinDesk this week by people with knowledge of the matter, came after Armanino late last year decided to stop performing crypto audits amid heightened scrutiny of its past work for a U.S. affiliate of Sam Bankman-Fried’s failed FTX exchange. Armanino has said it stands by its 2020 and 2021 audits of FTX US.

The official separation of the digital-asset team, led by Noah Buxton, took effect on Wednesday, the people said. According to the company’s LinkedIn page, The Network Firm was founded this year and is based in Miami.

Armanino’s former crypto clients included crypto exchange Kraken, digital-asset lender Nexo and investment firm CoinShares. Several of the accounts are expected to follow the team to the new firm, the people said.

Buxton declined to comment at this time.

The crypto industry was hit hard by FTX’s collapse, with plunging prices for bitcoin (BTC), solana (SOL) and other tokens, a slew of industry bankruptcy filings, the filing of class-action lawsuits, a regulatory crackdown and extra attention from lawmakers.

The Armanino episode highlights another chokepoint: Crypto firms are finding it ever-harder to get large, established accounting firms to provide audits and reserve attestations, even as the digital-asset industry pushes desperately to shore up trust and a reputation battered by 2022’s developments.

In December, Paris-based Mazars, a 47,000-professional global accounting firm that worked with Binance, the world’s largest crypto exchange by trading volume, said it was pausing proof-of-reserves work for crypto clients.

San Ramon, California-based Armanino is a top-25 firm with more than 2,500 employees and 22 offices across the U.S. The Network Firm, by contrast, has fewer than 20 people, with eight key team members listed on its new website.

Small but mighty

A banner on the company’s website says its founders “have pioneered the development of crypto-native accounting and attestation services as well as traditional tax and audit capabilities since 2016.”

“The Network Firm is 100% focused on the professional service needs of the crypto and digital asset industry,” the website reads. “We know that digital assets will transform all sectors of our economy driven by the potential of blockchain. As this shift accelerates, The Network Firm will play a vital role in providing trust and transparency championing this new industry.”

The pitch might be less impressive to large investors and companies from traditional finance, as they are likely to be more focused on the reputational risks of trusting the audit work of a just-established firm with more limited resources.

Crypto companies, many of them still fledgling operations themselves, likely wouldn’t be as bothered or deterred by the notion of working for a small firm with a short track record – especially when the former Armanino accountants can rightfully boast about their knowledge and experience in the nascent and fast-moving industry.

In January, U.S. Senators Elizabeth Warren of Massachusetts and Ron Wyden of Oregon, both Democrats, wrote a letter to the Public Company Accounting Oversight Board (PCAOB) asking if the activities of Armanino and Prager Metis, another accounting firm that did business with FTX, were consistent with “professional practice standards” or if there were any warnings of “a lack of professional skepticism.” (PCAOB Chair Erica Williams has said that the agency couldn’t inspect FTX’s audits because it’s not a public company.)

Peewee or prototype?

Francine McKenna, a full-time lecturer at the University of Pennsylvania’s Wharton Business School who has written extensively on crypto auditing practices, says that even firms the size of Armanino’s are seen in the accounting industry as a significant step down from the “Big Four” of Deloitte, PwC, Ernst & Young and KPMG.

Few of those bigger firms would agree to audit work for crypto companies, she said, though Deloitte does work with Coinbase, the publicly traded U.S. crypto exchange.

“It’s incredibly risky even for a firm in the Big Four that has hundreds of thousands of people available to them globally, and people who have experience in all industries, particularly the financial industry,” she said.

For now, most blockchain firms may have to rely on these smaller outfits.

“They’ve gone from the bush leagues down to peewee,” she said.

A key innovation of the Armanino digital-asset team, the TrustExplorer tool designed to provide real-time data on project reserves to blockchain users, has been ported over to The Network Firm, people with knowledge of the matter said.

The new website describes a real-time reserves product, LedgerLens, designed to “close the visibility gap between on-chain liabilities and off-chain assets, all with industry-standard attest reporting, and at unmatched frequency.”

Executives at Archblock, which supports the trueUSD stablecoin, a customer of the former Armanino real-time reserves reporting service, were “very surprised” when they learned the larger accounting firm was ditching crypto clients, according to Chief Financial Officer Alex de Lorraine.

Archblock plans to continue its use of the product under The Network Firm, he said.

“The firm may be new, but the partners have been working in the industry for a long time, and many of the team members were part of the initial attestation engine,” de Lorraine told CoinDesk in an email.

Kraken, another client, was “understandably disappointed in Armanino’s decision to end their crypto practice” but remains “firmly committed to undergoing proof-of-reserves audits,” according to a press representative.

“Kraken is currently exploring a range of options to continue to provide clients with full transparency and a means to cryptographically verify that funds held in supported assets are held in full on the exchange,” the representative told CoinDesk in an email. “We look forward to sharing more details about our plans in the near future.”

Press officials for CoinShares and Armanino declined to comment.

After publication of this story, a spokesperson for Nexo emailed the following comment:

Nexo’s real-time, online reserves attestation continues to be available at and is updated daily.
As the company that pioneered а real-time attestation of custodial assets and established a transparency benchmark, we are of course disappointed that a number of auditors are choosing to wind down their digital asset audit practices for all crypto clients, but we are convinced this will only be a temporary phenomenon as digital assets offer a high degree of transparency due to their inherent auditability. The market need for such products is a telltale sign that the firms will be back, and sooner than we think — testament to that is the Armanino team’s new firm.
To find the best path forward for the future of Proof of Reserves (PoR) in crypto, Nexo has been working for some time now on finding suitable and sustainable alternatives that will even surpass the previous benchmark we set for transparency. We are committed to ensuring the continuity of “Don’t trust, verify” when it comes to showing everyone that customer funds at Nexo are backed 1:1.
Among the options we are exploring is to continue working with the team of experienced professionals who currently produce our reserves attestation reports and who have been carrying out financial statement audits and other attest work with crypto companies, such as Kraken, since 2014.
Although our industry is changing, the commitment we had when we pioneered such the report in 2021 — to demonstrate utmost transparency in the way we manage client assets – runs deeper than ever.

Krisztian Sandor contributed reporting.

UPDATE (17:41 UTC): Adds comments from Nexo spokesperson.


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Bradley Keoun

Bradley Keoun is the managing editor of CoinDesk's Tech & Protocols team. He owns less than $1,000 each of several cryptocurrencies.

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