Episode 66

Greg Mocnik from Celestia Labs on Becoming a Web3 CFO

Greg Mocnik from Celestia Labs on Becoming a Web3 CFO

What We Discuss With Greg Mocnik

A recurring theme among the CFOs I've interviewed is their common starting point: many began their careers at top accounting firms, such as the Big Four. 

And the benefits of working for them are not insignificant - you are often surrounded by the brightest minds in accounting, work with some of the biggest clients, and your experience commands respect. 

Despite the long hours and relatively low initial compensation, many professionals accept these challenges, hoping that the skills and experiences gained will provide a competitive edge later in their careers.

The Accountant Quits aims to highlight the stories of CFOs who have successfully made the leap from traditional finance to blockchain.

On Episode 66, I spoke with Greg Mocnik, the CFO at Celestia Labs and previous Head of Finance at dYdX Foundation, supporting the growth of the dYdX protocol, one of the most prominent decentralized exchanges. 

Greg spent nearly five years at EY in their advisory department, and since many of you have similar backgrounds and aspirations to start working in web3, I hope this episode will serve as a source of inspiration.

Connect with
Greg Mocnik
CFO @Celestia Labs

[00:00:00] Umar: Welcome to The Accountant Quits, brought to you by the Web3 CFO Club, a community by Request Finance. With a curated community of Web3 CFOs from companies like Aave, The Sandbox, Binance, ConsenSys, Ledger, and many more, joining this club will allow you to network and learn best practices on Web3 financial operations.

[00:00:24] Umar: On The Accountant Quits podcast, we discuss how blockchain will impact the accounting profession and how accountants should prepare themselves for the future of work. My name is Umar, your host, and even if some might refer to me as the accountant gone rogue, my job is to provide you with the blockchain knowledge that you need that will be relevant for the accounting industry as a whole.

[00:00:47] Umar: Welcome to Episode 66. 

[00:00:50] Umar: This is the fifth episode of the Becoming a Web3 CFO series, where I dive into the inspiring stories of accounting and finance professionals who transitioned from traditional finance to web3. 

[00:01:02] Umar: A recurring theme among the CFOs I've interviewed is their common starting point. Many began their careers at top accounting firms such as the Big4 and the benefits of working for them are not insignificant. You are often surrounded with the brightest minds in accounting, work with some of the biggest clients, and you experience commands respect. Despite the long hours and relatively low initial compensation. Many professionals accept these challenges hoping that the skills and experiences gained will provide a competitive edge later in their careers. 

[00:01:38] Umar: The Accountant Quits aims to highlight the stories of CFOs who have successfully made the leap from traditional finance to blockchain. And today I have the pleasure to be speaking with Greg Mocnik, the CFO at Celestia Labs and previous Head of Finance at dYdX foundation. Greg spent nearly five years at EY in their Advisory department and since many of you have similar backgrounds and aspirations to start working in web3, I hope this episode will serve as a source of inspiration. 

[00:02:11] Umar: In this episode today, Greg will share his personal story falling into the web3 rabbit hole, how he self-taught himself accounting of on chain transactions, differences between a web2 accountant and web3 accountant, the web3 financial stack for the CFO, and much more. 

[00:02:30] Umar: Greg, welcome and thanks for making the time to be here.

[00:02:33] Greg: Yeah. Thanks for that introduction. Thank you for having me. I'm looking for the conversation. 

[00:02:39] Umar: Before we go into how you discovered blockchain, can you take us back to the journey becoming a chartered accountant through the ACCA qualification and later CFA charter holder and your early years at working at Ernst & Young in the advisory department and how that experience working on different M&A deals has shaped you in becoming a very complete finance professional today?

[00:03:04] Greg: Yeah. Thank you Umar. Happy to start there. I think a lot of people might relate, similarly, like you said, I, come from Big4, Ernst & Young. In this case, I've worked in Ernst & Young for almost five years through different positions in different departments.

[00:03:19] Greg: Like many of of, of the folks out there started an audit, back in 2014, I think the audits, you know, a lot of people have gone through the same stuff as it involves a lot of projects, first of all, uh. 

[00:03:33] Greg: I think in my audit, which was about a year, year and a half, included more than 40 different engagements of companies across different industries, private, public, and I think through that experience, working on on pre audit and then main audit procedures. I think the main takeaways from that is. You just apply a lot of like the, the theoretical knowledge from, you know, studying accounting at school and seeing it done in practice, right?

[00:04:00] Greg: Like, how are postings done, journal entries, systems, internal controls, you go through this like COTS and walkthroughs and you test controls. And, and then you, you basically understand how companies are run from the inside out. 

[00:04:15] Greg: You look at obviously, like I mentioned, controls design, you test them, you see if they work, how they not work sometimes.

[00:04:23] Greg: And then, but I think the, the one important aspect that was very interesting to me is how financial statements come about, right. All the way from when they're the different transactions on a transaction basis are posted to then how they're aggregated, consolidated, and then reported and displayed on what everybody else sees right as an output to all of this very complex operation.

[00:04:46] Greg: So, I think, I think that's one skill we're learning that a lot of people get from audit. I think that's a very good learning takeaway from also just, you know, how it helped me basically transition to crypto and build myself as a, as a CFO professional understanding the end-to-end process of how that's done.

[00:05:06] Greg: I think that's probably the key thing. Apart from obviously just understanding, I'm an IFRS person, so I study IFRS in, in many parts of the world. Local GAAP is not that different than IFRS unless you're a US GAAP.. But also then US GAAP for the most part, you know, conceptually a lot, there's a relatively big overlap.

[00:05:24] Greg: So, you know, so I think then the second thing you'll also get to know, like, a bit of the accounting standards, how they're applied. You start to like, learn about, like, developments, the different bodies that set up these standards and so forth. And then, how they affect, your future different arrangements that different companies might started getting into. 

[00:05:44] Greg: The next thing that, that was the larger part of my experience at EY was the M&A, right? At EY, it was called the Transaction Advisory Services, right? And that includes different, again, different work streams of service. At the time that when I joined, there was, most of what I was working on was financial due diligences for buy and sell side clients.

[00:06:05] Greg: So for a lot of the financial venture capital firms looking to acquire target companies in Slovenia where I'm from, but also wider Adriatic and Eastern Europe, right? And that is a little bit different than audit it, right? It's a little bit more, conceptual high level. We're not applying any statutory accounting standards.

[00:06:24] Greg: That is important, but as we were coming from a different perspective where a buyer is just looking to evaluate a business from a risk perspective and basically come to, a framework to evaluate, how much is this business worth and how much should I pay for it, right.

[00:06:39] Greg: So it's like more analyzing it from a high level perspective, both the P&L, the balance sheet, the cash flows, working capital, a lot of discussions with like the management, you, you understand it from also not so much commercial perspective and how the business, is competitive within the industry or vertical, they compete.

[00:06:58] Greg: You look at the process and how they manufacture whatever they're manufacturing. If it's manufacturing company or something else, and then you're working through these EBITDA adjustments and working capital adjustment and that adjustments that are at the final inputs that the VCs used to like construct your equity bridges and like determine and negotiate the price in the SBA process.

[00:07:20] Greg: Right. So I think that experience was more valuable than in, thinking more strategically about, value, valuation is a big part of that. I actually, a part of towards the end of my experience, I spent a lot of time in leading valuation and business modeling work stream, which was very technical, right?

[00:07:36] Greg: Building financial models, valuing assets and companies. And that was a big part of me then, you know, just like being able to valuing is a lot about DCF, right? Everybody talks about DCF. It's this word that's thrown around everywhere, but it's, you know, a very, very technical term that means a lot of things in EY.

[00:07:55] Greg: There's a, a very, you know, set methodology about very little inputs that are going to DCF models. And I think I've taken a lot of, a lot of that into like my future experience and working at foundation of, of how to build models and like how to think about like management accounts and how different stakeholders look at, financial statements. I'll stop here, but always happy to come back. 

[00:08:18] Umar: Yeah. So now in May of 2020, you offered a job at Meta, previously Facebook as a Project Manager, where, I understand you're required to upskill as a Data Analyst as well, and learn SQL to manage and analyze large data sets. Is that experience at Meta that inevitably brings you to falling into this Web3 rabbit hole? And what was it with blockchain at that time that made you curious? 

[00:08:49] Greg: Yeah, actually, I think Meta, I think Meta was not the right reason for why I joined crypto. I joined crypto personally in 2017 in August, you know, everybody has that friend that joined before them and they're very hyped in a lot of that, you know, heats up just before a bull market or there's something new happening.

[00:09:10] Greg: I think the, the SQL was just the, you know, the nature of Facebook and the size of, of the company, they just required for me to learn SQL, which again, I think it also turned out to be a very useful skill when I transitioned over to web3 and learn about, dashboards and, how to extract, blockchain information from data sets, which are SQL based databases from, you know, known providers.

[00:09:36] Umar: Now, after working for more than two years at Meta in June of 2022, you joined the dYdX foundation, your current company, and one of the OG's decentralized exchanges, which also supports perpetual trading. Could you take us back to when you found out about this opportunity at dYdX foundation, how the hiring process looked like and how basically your previous experience helped you in landing that role, given you didn't have a lot of blockchain experience?

[00:10:07] Greg: Yeah. Good question. I got to start with, I was a big fan of dYdX before, you know, I think, way before it was successful to the point that it is today. I think it was just the interest in the perpetual trading that it, that was what I was very interesting and still am interested in that led me to use the product and then eventually, you know, think about.

[00:10:28] Greg: Actually, it was about dYdX that led me to be interested in wanting to professionally join the space, right? But then as I was looking into the space and how I could be valuable, it led me almost to, to, to join a VC space because that's what I was involved before, right? So that's where I saw I have the competitive advantage over.

[00:10:47] Greg: I applied and through discussions with the trading team I learned about Foundation. It was right after the token was launched. So the dYdX Foundation was not at the same stage yet. It was more still developing. They were looking for an increasing headcount. And it was at that point that I was, you know, got introduced to Foundation folks and then, you know, went to the work trial.

[00:11:10] Greg: And then to maybe answer your first question, about the work trial and the hiring process at dYdX Foundation is very robust, right? I think it's, you know, I've gone through different processes. I can tell you Foundation, you know, takes it on another level in a good way, right? I think we like to pride ourselves that we want to hire the best people in the industry, right?

[00:11:31] Greg: So the process reflects that we, we try to take time and we try to spread our net wide and find that best candidate for any given position that we're hiring for. There's different rounds of interviews with different people on the team, depending if it's a technical and non technical position, you know, behavioral interviews or cultural fit big thing.

[00:11:50] Greg: We like people that that we want to work with. So culture is a big thing. And then the last thing involves a work trial.

[00:11:57] Greg: That's a paid, almost like a working week, where a person, a candidate comes in and gets presented with a case. And then they work through that week. And with a team, they get access to the team, they get a paper or a case study with different problem statements. Very heavy for me, I have to say was you know, very complex thing. Again is an open ended case so you can take it as far as you want.

[00:12:20] Greg: I took it very far and I think that's one of the reason perhaps that I also got a job, right? I think not only was I fitting the description, I knew the product I was in crypto before, I was a user. So I think all those factors combined, I think, you know, contributed to, the successful outcome and rising in position and responsibility that I have today at foundation.

[00:12:41] Umar: Can you share what was that case that you were meant to work on during that trial period? 

[00:12:47] Greg: Yeah, sure. back then it was, it was basically a four part case study. The first one was, you know, problem solving in a wallet situation. So it was more of like, you know, there's different wallets. How do you automate a process?

[00:13:02] Greg: How would, how do you reconcile positions? That sort of stuff, right? It's basically what led me then to, you know, to build this model internally after I joined to automate extraction and, documentation and labeling of wallets and transactions, which was quite interesting. So, that was part 1.

[00:13:21] Greg: The part 2 was basically building historical financial statements. So, you know, you basically give them part of assumptions, build financial statements, right? In my case, I've built a, you know, a three statement dynamic model. Then from there, build a forecast, right? Here's some assumptions. Make your own assumptions as long as it's reasonable, and anything works, right?

[00:13:42] Greg: Again, you have access to the team. You can ask any questions at a time that was a little more difficult because there was less, there was no finance team yet, but nevertheless, you have a channel you can ask and it's to know if you're on the right track or not. So that was, that was part three.

[00:14:00] Greg: Part four was more, more crypto. So more like treasury management, how would you, you know, propose? I think it was more like, yeah, more treasury management options to, diversify treasury into what, crypto strategies, how much, when, why, all that more creative, side of thing. 

[00:14:20] Umar: wow, I'm amazed how strict or how diligent they were in their recruitment process. Now, what were the challenges starting out your job then at the dYdX after this initial trial period, what were some of the first responsibilities you worked on, you worked on be the financial reporting process, streamlining operations.

[00:14:41] Umar: You touched on the fact that you worked on automating, basically the extraction process of on chain transactions, how to categorize them and subsequently push them into your accounting software. 

[00:14:54] Greg: Yeah, I think there were. Some challenges, but most of it, it was just a lot of work.

[00:15:00] Greg: And that was just coming from the fact that foundation was essentially established, about seven, eight months before I joined, right. I joined in in April, June time. When, yeah, it was almost one year after foundation was incorporated, then there was other entities, below it that got, incorporated later, but I think it was the initial challenge was just, you know, understanding what, what pieces are there.

[00:15:29] Greg: Whereas all of the, you know, just basic stuff, you know, your first, you want to go to T0 is what I want it, wanted. So, and I was starting at T minus 11 months, right? So it was the month that time was, ticking on, but I had to move very fast to get to T0 because it was also, audit time.

[00:15:49] Greg: And first audit time, we didn't have any, you know, accountings, accounting statements, management accounts. It was just a lot of documents spread across different sources. So I think it was the first challenge, get the , you know, drive organized, speak to accountants. We were just at that time also changing accountants.

[00:16:08] Greg: So getting on the same page, I think challenge of just explaining them who we are. You know, all this crypto positions, transactions, how do they work? Where are they? I think that was a big challenge. How to account for them? I think one of the challenges, obviously, for the most part, people that are coming from web2 are coming for a for profit, companies that are just, You know, they're just driven by a different motives.

[00:16:34] Greg: They have revenue. They have costs, you know, as a foundation for the most part, there is no organic revenue. The structures are different. You're in a different jurisdiction, which is usually different than most, right? Especially speaking as a non European, you know, Swiss based foundation.

[00:16:50] Greg: In some ways you're, you know, less regulated, but also regulated more in different aspects, right? So it's very hard to like, cause you have to like know more than your accountant sometimes, to help them get you the, you know, the accounting treatment and record transactions in the books.

[00:17:09] Greg: I think that was a big part. It was not that there was like something that we didn't know. I mean, there's always things that you don't know, especially on the tax side. I think tax side is a big portion of crypto, a big portion of being a finance person in web3 and working in foundations and, and these jurisdictions is where, where tax oftentimes kind of leads accounting.

[00:17:30] Greg: Right? Because accounting is just, you know, Swiss, local GAAP is more lax. It's not IFRS, it's not US GAAP, right? There's less regulation on how these different crypto transactions should be accounted for. And, and, you know, you just have to take an approach and then more or less just apply consistently and have some reasoning behind it of why you're doing things the way you are.

[00:17:50] Greg: I think that was, that was the most challenging part. And then, You know, the, then some of them are just based more idiosyncratic based on our structure, right? We have multi entity structure in different jurisdictions, different local gaps, different currencies, you know, people in crypto get employed through different types.

[00:18:07] Greg: There's like this EOR structures, all the treasury operations that I didn't have, experience before, because, let's be honest, getting to this higher Head of Finance/CFO positions, you know, it takes years, in traditional world. These are bigger companies, unless you're looking for a startup, in which case then it might be similar.

[00:18:24] Greg: You might have experience, but just, you know, basic, bank account custodian, cash management, funding a lot of, a lot of times. In crypto, you're one person doing all those things. You mentioned what was, what was I doing? I was doing everything right. It's all the payroll, all of the payments, all the accounting, audit, regulatory, stuff, forecasting, budgeting, all of it.

[00:18:45] Greg: Right. So it's, the scope is, it's very wide and you have to do everything and you, and it's just, yeah, I think that element so many, it's a big challenge, right. And then, yeah, just going back for a final point is, you know, when you're dealing with all these multi entities in different jurisdictions, how do you bring everything together, right. Consolidation, eliminations, you know, the board wants to hear one consolidated story, right? Yes, you have 3 entities, but tell me in US dollar terms, right? Regardless, if you report in CHF and this is statutory statements. I mean, we need something else, right? So we have a different set of that is our functional currency, main currency is USD, so we think about in USD terms, so then you need to be able to communicate a different story to, different stakeholders in a different way. So I think, that was also, a bit of a challenge at the beginning. Now we have another model that takes care of that.

[00:19:41] Umar: I want to dive a little bit more into this financial reporting process, and you can feel free to add on the consolidation part. So from one of the previous conversations we had, so at the time at the Web3CFO Club, where you were on this webinar, you were invited as panel speaker. You shared at the time that dYdX was not using one of those subledgers that we have on the market.

[00:20:06] Umar: So the listeners will be familiar to them. Like the, ones I spoke to like Cryptio, Bitwave, Cryptoworth or TRES. Instead, you stated you custom built your own like proprietary sub ledger tool to help you categorize your on chain transactions. Now, like a lot of the listeners, they might be using the sub ledgers. So could you, walk through your process for categorizing, let's say your inflows and outflows and, how that ties up to your whole financial reporting process. 

[00:20:40] Greg: Yeah, absolutely. And I think, you know, I think most people probably maybe should be using some tooling.

[00:20:47] Greg: I think back then when I was starting, I just felt that that was the easiest way based on, the complexity, the number and sheer volume of transactions and wallets that we had an assets that we were working with, which was relatively simple, right? I still, I still think that today is with a little bit of different complexity.

[00:21:04] Greg: The fact that we are now on our own dYdX chain, right? I think that is a new, new change that it changed things a little, but originally, and we still have used that model. It was an Excel based API model where, you know, it's a lot simpler, but, or maybe that's just how I view it, but it was basically, extracting through Etherscan API.

[00:21:27] Greg: Etherscan transactions, or ERC 20 transactions. We had a model where we segregated wallets and assets. And those transactions would basically be pulled in those worksheets separately each wallet would be documented. They had a contra account and label and address all Etherscan links and all this stuff.

[00:21:47] Greg: So that would be then, as soon as that data landed, it would get parsed through, split and then cleaned up a little all automatically, just basic TEXT Excel functions, and then there's other APIs that would pull a different information, like pricing for different tokens, USD, Fiat FX, all those information that gets paired, obviously, to then calculate what for us was a reporting currency was, CHF, so that, we would get valuation, and then all the documentation piece, I was always thinking it from accounting perspective, because that was, the ledger that was used also in shared with the accountants to be done, may make bookings in the accounting software, but involved a few manual inputs, right?

[00:22:31] Greg: It was more just, the description of the nature of transaction. It was a link to supporting documentation invoice agreement, right? And then, an accountant would come in as they were recording transactions to put in, a general ledger posting number, right? Unfortunately, we're not able to directly pose those into the accounting software just from the incompatibility of the accounting software that we use or our accountants use, right?

[00:22:57] Greg: So that was not an option, but I think was nevertheless still good enough for our accountants to come in. See okay, per wallet, each month close come in, these are transactions per different, per different wallet. Each wallet had its own trial balance account, and then see the full information when there was a cash inflow/outflow, the valuation, the supporting documentation, and they were able to know where to post it and, and all everything else as well for us.

[00:23:25] Greg: And therefore auditors, know this is exactly when it was posted. This is a posting journal number. And it was very easy for us to do like, you know, whatever the auditors wanted to sample. It was right there, right? You could just give them the sheet and go play with yourself and it wouldn't take any time, right?

[00:23:44] Greg: So that's, that's essentially how it worked. 

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[00:25:30] Umar: Now, do you have other web3, not necessarily web3, but other tools that you'd recommend for crypto accounting? I also noted, for example, you're a strategic advisor at Acctual, a tool for managing accounts receivable and accounts payable in crypto. I've spoken to a few similar tools, let's say on this podcast and maybe you've tried some of them. So could you share some of the features that make Acctual stand out as a crypto accounts receivable and accounts payable tool? 

[00:26:03] Greg: Yeah, absolutely. Big fan of Acctual, like you said, advisor. So obviously bias, but I think it's, you know, I think the team is still very small, you know, small developing that just came out with this product, or I would say they have two products right now, earlier this year, right.

[00:26:19] Greg: I think, how they try to differentiate. I think. You know, there's many different tools that are trying to like, make, payment options or play ledger solutions. I think Acctual is not at least at a current stage, playing that game, right? I think they're, they're approaching it for a more, a different angle.

[00:26:37] Greg: Starting from the second one, I think you've all seen or should check out the new invoice generator that Acctual put out. I think, you know, that's one brilliant free tool for people to use, especially, different contributors in web3 that are looking for a solution to easily issue invoices and get paid.

[00:26:56] Greg: Right. I think, you know, I can understand that I'm sure, other people listen to your podcast, know that, you know, we're, especially for on-chain crypto people, they just don't know how to do invoicing, the format and like the different types of invoices you get is just, you know, mind blowing.

[00:27:13] Greg: So it's just very hard, to like manage and know what's outstanding, when it was paid, which invoice ties to what agreement, all that stuff. It just takes a lot of time, right? So I think Acctual it's trying to tackle that problem through this invoice generator, right? It's just making something that's good looking, very easy, intuitive to, to use and professional, right?

[00:27:36] Greg: Also that's from a contributor's perspective, from a foundation perspective, right. Anyone looking to create customized links, to share with contributors. Hey here's a link you can create an invoice using this link and it's going to land directly in this other Acctual product that we can then easily use to, to get you paid in any way you want to get paid.

[00:27:55] Greg: Right. Which brings into this like primary product. It's just the Acctual AP tool. I think the AP is where the most of the painpoints currently are in crypto, right? Especially when we're talking about foundation, we're, we're paying people.

[00:28:07] Greg: Most oftentimes, we're not a revenue generating entities, so, but the payment, aspect is challenging, right? And I think the Acctual is exactly that more from, you know, how do you review and, and pay people in, in a way they wanna be paid.

[00:28:22] Greg: So it's more like, you know, ingesting this invoices in the most easy way, which is through, you can use this image generator or you can push other invoices, automatically forward them into this Acctual billing address and they're gonna land into Acctual platform, and then automatically get scanned and help you extract some of the key information that you need to pay people.

[00:28:43] Greg: You know, it's also almost like this liquidation review tool when in traditional world, you get to liquidate invoices, right? And you have to like review all the stuff you, you know, is this how much I want to pay? The right address, all this stuff. 

[00:28:57] Greg: Acctual helps you do that stuff. and then obviously there's like the payment.

[00:29:01] Greg: Payment option of Gnosis Safe to be able to, like, make these payment options. I think that's like the introductory features. I'm not saying that other tools don't support that. I think, again, we're still very early. Acctual is very early. There's much more that, that, we want to build or I want to help them build.

[00:29:18] Greg: And yeah, I think, definitely people should, you know, I think we are much further ahead now than, again, than I was when I started, there was a lot of these tooling that blew up in Q3 and Q4, a lot of people were building still in the background, when I started, but I think a lot of them are also just tackling very small issues, right?

[00:29:37] Greg: Very small issues. And oftentimes then you have to have smaller tools to, solve little issues, like how do I coordinate signatures between Safe owners? Right? And I want to get notifications. Yeah, there's tools for that, but I'm using a different tool to make payments and, and there's no compatibility between different tools and, and it was just, it's just awkward to like having to use different tools for, because you like this, but you don't want to transition over.

[00:30:06] Greg: It's just very sticky or, you know, painful to do that right. Yeah. 

[00:30:10] Umar: So other than Acctual, is there a tool that comes to mind that basically made your life a little bit easier, just for the listeners to understand like the financial stack that a Web3 CFO should be using? 

[00:30:25] Greg: Yeah, I think for us, I mean, it's very easy, right?

[00:30:29] Greg: So we had an API. provider, but that's more for like, unless you're using a Ledger tool, you've got your own Ledger, obviously wallet and multisig structure for payments. That is one. There's, currently now we backed off to to Gnosis We used to use different tools like Utopia or Parcel to get other features for, for payments and being able to track recurring payments and those sort of things.

[00:30:55] Greg: That was one. Another one is just more was for like, getting notifications in Slack for when transactions are raised and then being able to coordinate those signatures and get reminders when, those are still pending and you want to get them out. I think those are just basic things.

[00:31:12] Greg: There's not that many tools that we're using. I think we want to use less tools and want to have more, unified tools that are integrating between themselves. And we want to have one subscription and then you guys work with all these other tools to like ledgers, to integrate between themselves.

[00:31:30] Greg: So I don't have to have three subscriptions, I just have one, right? I think that's what I would like to see in all these tools because there's just so many of them. 

[00:31:38] Umar: . Now I want to also go through your experience of, working on an external audit. So, I'll share, something briefly for the listeners. So external auditors, they use audit assertions. such as completeness, existence, accuracy, valuation, in order to devise their audit procedures, which helps them to gain reasonable assurance whether the financial statements are not materially misstated.

[00:32:06] Umar: A lot of technical words there that auditors oftentimes use, but then at the end of their audit, the auditors will serve management with a management letter, which serves to highlight some of the weaknesses in internal controls. Now, given the lack of literature around setting up a finance function for web3 companies, especially around wallet management policies, I want to ask you if dYdX has gone through an external audit, and if so, what are some of the learnings you've gathered, for example, on having proper documentation and policies for internal controls? 

[00:32:45] Greg: Yeah, absolutely. I think you mentioned documentation there. I think documentation is probably the main thing, right?

[00:32:51] Greg: I think we oftentimes, because we have so, the scope is so big and we work a lot, we just forget about documenting stuff, right? Because we like oftentimes for, I was for a very long time, a one person finance team. So it's just difficult to like document everything that we're doing to the, the lowest level, but I think that is required, right?

[00:33:10] Greg: People don't read your mind of how you're doing things and, and checking your mind if this is in fact how you're doing them, right? So I think, yes, we've gone through two audits so far. We are obviously in just around a quarter of, doing ours for 2023 and for the first year, it was, you know, it was, it was the first one.

[00:33:29] Greg: So, we still didn't have our internal control, system set up. So it was a light audit in that respect with some, you know, reservations on, on, hey, this is something you should, you guys should work on and improve. And, and we did, right. And I, and I think that's where, it's very much similar to traditional world, right, external audit. 

[00:33:49] Greg: I mean, they're auditing statutory financial statements and a lot of like, I think emphasis is on pre audit. I cannot speak so much about the main audit because it's done externally. You know, more, that's where the external accountants, those that are actually booking things, play a bigger role in, uh, explaining and talking with the auditors directly.

[00:34:10] Greg: But I think it's the internal control system is the most important in, in my opinion. Just basic segregation of duties like, access controls, tracking changes and knowing who can do what and, and making sure that there's, sufficient, access to, for people to do the work, but not much more right.

[00:34:29] Greg: People should only be able to do what they have to do for to perform their work, but then maybe have some access that is more ad hoc or a temporary, right? I think that's like the bigger piece. I think the, the one that I think that is more, that actually has been something that I've been for the first time involved, in crypto is the IT audit part.

[00:34:50] Greg: And this is where, you know, what you mentioned starts to get into play of like, wallet management, and like, private key management generation, storage, what they call these key ceremonies, right. Recovery techniques. What are these policies, what solutions are using, what are the fallback tactics or strategies right for and like disaster scenarios.

[00:35:12] Greg: I think that's what people like are interested more like, you know, storage of private keys that from before self custody wallets, right. And, and other things too, right. Just data, a lot of data now is in clouds while cloud solutions are using, you know, God forbid you're storing your private keys in Excel with all the names of owners and addresses and all that stuff, right?

[00:35:37] Greg: Big no. And, and then I think I learned a lot through, through that, right? Just speaking with a specialized IT Auditor that, that just, basically covers the IT part of, of the IT stack and, and that we use, right. I think that helped us inform and improve some of the practices that we were using and, and just, mainly hardware, like private key management, uh, stuff.

[00:36:00] Greg: I think when it comes to like, just other more, obvious questions of like how do you account for crypto positions, classification, transactions? I think that space is a little more subjective, right? And what involves more professional judgments, an accountant would say, right?

[00:36:17] Greg: I think all in the end where an external accountants wants to achieve is this, this, there's absence of material misstatement in the financial statements. There's no, there's no perfection here, right? So I think that's where we are seeking here also. And, and, you know, I think it's, they just want to cover enough of an exposure, right?

[00:36:37] Greg: I think for the fact that, you know, a lot of companies or foundations that would say we still heavily rely on, or I can speak for a foundation anyway, on centralized custodians of some source, right? So in that a lot of, you know, that risk is outsourced and we start to think about, what measures custodians have to make us comfortable, how they manage keys, not how we manage keys, right? Because then if we self custody a relatively minor proportion, it doesn't matter. Because if everything gets stolen, I mean, it could be less than 1%, right? So it doesn't matter. So where do you hold majority of your assets? And what are the practices?

[00:37:13] Greg: And what assessment do you do on vendors and annual assessments, if that's what you're doing, we're onboarding to new vendors and how that process looks like there, there would be more interested in looking for that. I'll stop here. Maybe there's any other questions.

[00:37:25] Umar: Given you have so many, uh, a few related entities in the dYdX corporate structure, does anything come to mind how the auditors were verifying, let's say completeness of related party transactions? Yeah, anything comes to mind of the audit tests they do there. 

[00:37:45] Greg: Related party transactions? Yeah, so, so the scope of the audit is statutory Switzerland.

[00:37:50] Greg: In our case, it's the only entity that's mandatory requires to, to perform annual audit. The other ones are not. There's not also that many related party transactions. I think when it comes to related party transactions, you know, that's more of a also, a tax aspect where you obviously want to ensure there's arm's length, valuation and, there was no spillover of any funds or profits from one entity to another, right?

[00:38:17] Greg: I think the bigger emphasis, apart from not just transactions, because those are not very you know, valuable, or at least in our case, and not, there's not that many of them is still as a parent is Swiss entity, you've got investments in the subsidiaries, I think the investment is the part that is more challenged is the position on the balance sheet.

[00:38:39] Greg: That's more what they're interested in. Justifiably, right? And I think it's, you know, I think that it comes through there indirectly they're auditing the consolidated view, even though the consolidation is not the part of the scope, but they need to, you need to have, and you need to present them with enough details, enough credibility to, for them to be able to perform almost like an impairment test, right?

[00:39:01] Greg: That's what we're doing internally to assess the carrying value of the investment in all of these subsidiaries. And we perform, I mean, we apply the same standards that we perform that we apply for Switzerland for all the other entities. So, so we are very comfortable and there's all possible detail that in financial statement that we produce for all these other, companies that are not that are not regulated to the same extent as Switzerland is.

[00:39:25] Umar: Now, I want to speak a bit about the emerging opportunities for accountants in web3. A recurring question whenever I interview CFOs like yourself on this series is to touch on the need for more accountants. Um, you might be aware I I've been trying to contribute to educating accountants with the crypto accounting academy.

[00:39:47] Umar: So based on what you've observed, what are some of the emerging skills, knowledge for accountants and other finance professionals to, to have in order to work in web3, or if I can rephrase it, so let's say tomorrow you'd have to recruit an accountant to come and help you work in your team.

[00:40:06] Umar: What are some of the skills you'd be looking for that accountant to have? 

[00:40:11] Greg: I think, I think accounting is too small, right? I think accounting skill is like, you know, everybody, I mean, everybody should know some accounting, but oftentimes the accounting is outsourced. So you, it's a different type of skill that you have to have is more communication skills, understanding what they're communicating to you and being able to articulate what you want to articulate to the other person that's probably less educated and know less about your project, obviously, than you do right. 

[00:40:39] Greg: And, and guide them, and, help them help you get these transactions into the books. I think that's where the more, creative, intellectual part is, right? You have to understand that your project and your tokens and your transactions to much greater degree. So you can educate this person to help you get his job done.

[00:40:59] Greg: I think that's one part. And then. I think that requires just a person to spend time in crypto, right? How to start. I mean, you have to, you know, you know, spin up your own Metamask and maybe a Gnosis Safe and go play around and see what these transactions are doing.

[00:41:13] Greg: Go use bridges and different chains and, you know, go invest, Etherscan, X scan chain, whatever you're using, uh, and see how it is, right? You can, go explore and see all these, you know, custodians if you want. And there's some information of, of, different solutions out there, what type of wallets, all this stuff, right?

[00:41:33] Greg: I think that's, that's what people should be working on. You know, I think now there's more information. Your podcast is a great source. There's other resources. I think there's more information definitely for, for people to use. But yeah, I mean, other things are more on the strategic side of things, right?

[00:41:51] Greg: Outside the accounting, like crypto stuff, right? Just like, how do you have treasury operations of like a lot of in crypto is like OTC, right? Like, what does that mean? Like what, you know, what are OTC transactions like? Why do you use them? Who do you work with? Like different set of considerations. Oftentimes you have a lot of your native token, very concentrated position, your balance sheet is like jumping up and down, right?

[00:42:16] Greg: Or market value of your, treasury anyway, right? How do you manage that, right? Risk management is basically my job. My job should be risk management, you know, risk manager, not a CFO, right? Cause you're, you're just a lot of risks, like a lot of risks on different levels.

[00:42:30] Greg: So it's more like understanding what type of risks are. What is the degree of risk you're taking? How do you, how can you mitigate? Who are the partners that can help you do that? How do you know that they're not, I don't know how to say this nicely, but you know how they're pricing risk fairly, right?

[00:42:45] Greg: And, you know, just understanding some of these strategies that, that are traditional in crypto, right? I think that's very difficult to get, very good skill if you do have it. And then there's all these like equity or token composition schemes, right? Understanding what types are, are there, how have they used, whenever they used the tax aspect of all this crypto.

[00:43:04] Greg: Huge, right? I think it's not even, you want to have, I think maybe it's more valuable to have a tax expert or even a lawyer, right? It doesn't even have to be an accountant. You don't have to have to be an accountant. So it's like a lot of different skills that, that it goes into being an accountant. I wouldn't even say that. 

[00:43:23] Umar: Yeah, I completely agree with you. So having a. a relentless sense of curiosity is imperative to work in web3. There's a last question I want to ask you, not so much related to web3 but rather on how do you take time off?

[00:43:38] Umar: So this industry is very fast based. You're plugged in 24/7. You're just saying right now you're on holiday, but you still, you're never fully on holiday. So a lot of people I speak to, they have the same feelings. Sometimes their workdays feel never ending. There's always something new to learn. But, not taking time off is not sustainable.

[00:44:00] Umar: I want to ask you, are you disciplined about taking time off? And what do you do, what do you enjoy doing on your off days, let's say not related to web3? 

[00:44:09] Greg: Yeah, I wish I was more disciplined. I don't think I am. I think it's just, I think it's, yeah, it's just the fact that, you know, the space is interesting and there's so much happening at very fast pace.

[00:44:22] Greg: Even just looking at dYdX, right, it's very difficult to keep track just with the project that I work with, right? Let alone everything else and all these layer 2s and DA space and everything else that's happening. Very difficult, right? So I think it's just, I think it's just like so encompassing that. I just also just, it's not like almost don't view it as work, right?

[00:44:43] Greg: And you are working because you want to be pushing things forward, right? Things don't happen. You just can't go on PTO and expecting somebody else going to do the work. It just doesn't happen, right? So I think it's just that, I always don't want to have this like huge backlog of things that I come back and have anxiety even before I finished my PTO that I know that I'm going to want to do or going to have to do.

[00:45:04] Greg: Yeah. You know, and then be, out of office, pretend, pretending still three days in into the work because I have all these backlog and emails and context that I have to catch up on, right. I think for me personally, and this is probably not a good thing. You just stay in a little and just keep cleaning all those things and marking and, you know, organizing yourself because that's going to allow you to, you know, just stay on track and like, be one step ahead.

[00:45:29] Greg: But, obviously you cannot do this for a very long time until you burn out. Remember in my first years at M&A, it was not work. I was not on PTO literally for a year, right? A year and then take you this. It feels like a lot of that energy and like drive. I feel like in crypto almost feels it almost feels like that because it is right two years and been in crypto professionally now.

[00:45:53] Greg: Feels much longer, right? I don't even remember my Meta days cause you're so far out, but I still like, you know, I think the benefit of this space is it's fully remote. You have the full autonomy responsibility to do your own work, but you can also, for the most part, work from anywhere you want. So I think that's a very good benefit.

[00:46:10] Greg: I think this is where the space is going at least in web3, web2, not at all. And I take, you know, I'd like to, I'd like to think that, I take care of myself in that regard very well. I like to travel. I like to, you know, do water sports, surfing, diving. I like to try different other sports, say physically active, right.

[00:46:30] Greg: Mentally. Yes. I think that's also a big part of it. So, you know. I think for now that's just how it works, but I'm sure, at some point in the future, it has to like, we're all still, you know, I think there's very, a lot of young people in the space and I think young people, or maybe this, this space just makes you feel younger in some, in some ways too, because it just reenergizes you.

[00:46:52] Greg: And I think as long as there's that aspect to it, then you just keep working. It doesn't feel like work. 

[00:47:00] Umar: Yeah, I completely agree. And there's a lot of opportunities for accountants. This morning I was speaking to someone, an interesting profile. So he's nearly 60 and he told me, well, I'm not getting any younger.

[00:47:12] Umar: And I realized that someone like me at my age, it's becoming harder to find a job, and he realized that having a crypto accounting skill puts him apart like from, from all the other accountants because it's still very niche and he wants to basically do the course and that's why like I had the conversation with them.

[00:47:34] Umar: So, so yes, there's a lot of opportunities for accountants to work in web3. And that's one of the reasons I wanted to have this conversation today. Greg, you've listened to the podcast and you should be familiar with the last question that I like asking to my guests before they leave is, do you have a favorite quote or let's say a maxim that you live by?

[00:47:55] Greg: Yeah, I had, there's lots of different quotes, I think it goes by, I'd rather regret the things I did than the things I never tried. I think that's, that's one, you know, I think when I was in that, junction of leaving Facebook, which is also the time when I was considering moving to the U.S. and having a fancy Facebook reality lab job, right.

[00:48:17] Greg: That was that basically, you know, bold move, which is also one of the Facebook values that I, I relate to, very much where then I decided to join this space, right? Cause it's like, what do you have to lose, right? It's like you're, even if it's a failure, you learn from those things and people value that instead of staying with one job for very long.

[00:48:38] Greg: I think I personally also would value more somebody, not like jumping from job to job too frequently, but I think it just shows that somebody who's able to pivot and adapt to a new environment and grow new skillset right. I think so. That's probably the quote that I would go by. 

[00:48:56] Umar: I love it.

[00:48:56] Umar: I have a similar one, which is, as long as you've tried, you've won basically trying is everything. 

[00:49:03] Greg: Yeah, sounds, yeah. A rephrased version of mine. Nice. 

[00:49:09] Umar: Greg, thanks a lot for coming in today. I really enjoyed this conversation.

[00:49:13] Umar: it's been a long time coming. I hope the, I'm sure the listeners have enjoyed, listening to, to you today. 

[00:49:19] Greg: Absolutely. Okay. Thank you for having me. I enjoyed the conversation as well. 

[00:49:23] Umar: Lastly, if people want to, let's say, reach out to you. don't want people bothering you too much. You have a lot on your plate, but let's say if people want to connect with you, what's the best way to do so? 

[00:49:34] Greg: Yeah, I think LinkedIn always, one other ways. Telegram at my last name and G you'll get to my inbox.

[00:49:43] Greg: So either of those two, I think would be a good, good way to reach out if you want. 

[00:49:47] Umar: Perfect. Well, thanks a lot for coming again today, Greg. 

[00:49:51] Umar: I would like to thank everyone for listening to this episode. You will find all the links of the episode, show notes, and transcript on the website of The Accountant Quits at theaccountantquits.com. 

[00:50:02] Umar: Please note that this content is for general information purposes only and is not a substitute for consultation with professional advisors. If you do know anyone who could benefit from the episode and you care about them, please do share the episode with them. All the episodes are available on Spotify, Apple Podcasts and Google Podcasts.

[00:50:22] Umar: And by leaving us a review and rating, you will support the channel and all your fellow accountants. In order to be notified each time we release a new episode, do follow us on Instagram and LinkedIn. We hope to have you with us next time. Bye f

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