FTX
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.
Biases present in the decision
Toxic combinations
- Yes Committee
- Golden Child
Reference class base rates
Across all 146 curated case studies in our library:
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)
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