Decision IntelFTX
FTX Cryptocurrency Exchange Collapse
Estimated impact: $32B
FTX, valued at $32 billion, collapsed in days after it was revealed that customer deposits had been commingled with its sister trading firm Alameda Research. The company operated without a board of directors, and investors performed minimal due diligence, deferring to founder Sam Bankman-Fried's perceived authority.
Decision context
Whether investors, auditors, and regulators should have demanded standard corporate governance structures, independent boards, and segregation of customer funds before extending trust and capital.
What the record already said
The document below predates the decision. Everything after it is read from that document alone, so a reader can check each line against the words above it rather than take the reading on trust.
FTX raised $400M at a $32B valuation from investors including Sequoia, Paradigm, SoftBank, Temasek, and the Ontario Teachers' Pension Plan. The company had no board of directors. CEO Sam Bankman-Fried was the sole signatory on corporate actions. No independent audit of the relationship between FTX and sister trading firm Alameda Research had been performed. Sequoia's published profile described SBF playing League of Legends during the pitch meeting as a positive trait.
Source: FTX Series C press release; Sequoia Capital published profile of Sam Bankman-Fried (archived, deleted November 2022)
What a reader could have found without knowing the ending
- No board of directors at a company holding billions of dollars in customer assets
- Founder-controlled holding companies commingling corporate and personal funds
- No segregation of customer crypto deposits from sister trading firm balance sheet
- Unaudited relationship between FTX exchange and Alameda Research
- Sequoia published profile celebrating founder attention-splitting as a virtue
DI would flag the absence of a functioning board of directors at a $32B financial-services company as a binary governance failure. The Sequoia profile's framing of founder-as-genius as substitute for institutional due diligence is a textbook halo-effect signal. Customer funds commingling is a bright-line fiduciary red flag — no bias-adjusted valuation could survive basic audit-trail verification of customer-asset segregation.
Written after the outcome was known. Nothing here can be falsified, which is why it sits below the document rather than above it.
Decision anatomy
Red = risk factor present · Green = protective factor present
Biases present in the decision
★ Primary driver · Severity estimated from bias type and decision outcome
Toxic combinations
The curated library this case sits in
Across all 155 curated case studies in our library, by documented outcome:
The library is curated toward documented failures, so this split describes the library, not the base rate of deals. The case above is one row in it.
Lessons learned
- Authority bias toward charismatic founders can cause sophisticated investors to abandon basic due diligence.
- The absence of a functioning board of directors is a critical governance red flag regardless of a company's valuation.
- Commingling customer funds with proprietary trading is a fundamental violation of fiduciary duty that no amount of innovation justifies.
Source: FTX Debtors' First Interim Report, Chapter 11 Case No. 22-11068 (2023); SEC v. Samuel Bankman-Fried complaint (SEC Filing)
These patterns were flaggable in FTX's own record — before the outcome.
See the full hindsight-stripped audit we ran — no login, no card. Then run the same audit on a deal you have already closed.
Or leave your email, we'll run a strategic memo of your choosing and send the readout within a business day.
Workflows that fire on decisions like FTX’s
The same Recognition-Rigor Framework that documents this case audits memos in the same shape — before the outcome forces the lesson.