The Rise and Fall of FTX

Name: The Rise and Fall of FTX (English version)
SKU: 124014

Dey, Aiyesha; Heese, Jonas; Pacelli, Joseph; Hancock, Max

Product #:124014

Supplier:Harvard Business School

Discipline:General Management

Setting:Bahamas;Hong Kong;United States, 2023

Details:Case (PDF) • 26 pages • 2023-09-25

Subjects:

Leadership and managing people Management

Geography:

Bahamas United States Central America and Caribbean North America

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$12.40

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In November 2022, Sam Bankman-Fried's multi-billion-dollar crypto exchange, FTX, collapsed, wiping out investors and throwing the crypto industry into disarray. As FTX's founder and CEO, Bankman-Fried developed a reputation for his unerring business sense and high-profile charitable giving. To many, it came as a shock when in the wake of FTX's collapse, the attorney responsible for restructuring the company professed he had never seen "such an utter failure of corporate controls at every level of an organization." How had Bankman-Fried managed to hide his malfeasance so well, and for so long? The investigation also raised questions about the people and organizations that enabled Bankman-Fried's wrongdoing. What should regulators have done differently? Were the VC funds that bankrolled FTX partly responsible?

Learning Objectives

The case allows instructors to explore the following: 1) the role of regulation as a barrier for Innovative business models (i.e., descriptions of differences between U.S. / Hong Kong / The Bahamas 2) relatedly, should regulation allow total risk? or should there be some limits? 3) the role of VC firms in pushing potentially flawed businesses; 4) what governance mechanisms were present or absent (e.g., what did the SEC do before the collapse? did they have an oversight mandate? what did the board do? how was the company structured? did they have any internal controls? 5) why did no one see/what explains the hype around FTX and Bankman-Fried?