You raise a good point about due diligence. They probably did as much as possible, but remember that they were investing in a private company that was committing massive fraud. It is hard to know if a company is lying to you when you are doing due diligence without direct access to internal materials. Also, for FTX, 75m USD was a tiny investment, so the amount of access granted for due diligence was probably very limited. I guess the sale was done with a 50ish page powerpoint presentation, and a few meetings with the C-suite. Some part of investing in private companies is always a gamble.

If we consider publicly listed companies that require annual audits by external professionals: Look how many people were taken surprise by Germany's largest start-up: Wirecard. It took years for highly skilled investigative journalists to expose the extent of fraud. Yes, you can be cynical about professional auditers, but they were also subject to an impressive level of deceit. When Dan Mccrum from FT was getting very close, I still thought it might be their Asian ops were a fraud, but EU ops OK. I was dead wrong -- the whole thing was a fraud.