Lessons Learned – A Year After the FTX Collapse

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It’s just over a year since CoinDesk published the story that led to FTX filing for bankruptcy just nine days later.

The exchange’s dramatic collapse had a monumental impact on the industry, brutally unearthing suppressed and ignored concerns over trust, regulation and the extent of fraudulent activities.

But such traumatic events can also serve as a watershed moment, dividing the timeline between how things were once done and how they’re now done.

So, what’s been learned? What’s still to be learned? And what can we expect to see going forward?

The high-profile CEO

As a PR professional, I’m well aware of the value of a high profile for CEOs.

FTX’s Sam Bankman-Fried certainly had the kind of profile that was up there with the best in terms of gaining and holding attention.

Unkempt, eccentric, philanthropic – a billionaire before thirty. SBF was unique. And he was savvy enough to leverage this image alongside extensive and expensive marketing campaigns.

SBF was just as comfortable – or perhaps just as nerdily uncomfortable – onstage alongside Bill Clinton and Tony Blair as at the Super Bowl with celebs like Katy Perry, all of which he voraciously cultivated.

Such associations and endorsements serve to elevate credibility and visibility, building reputation and trust.

After all, it’s human nature to judge at ‘face value’ and make decisions due to associations with trusted personalities.

Crucially, though, this is not how a finance company or the burgeoning new crypto sector itself should ultimately be weighed by prospective participants.

SBF’s public image unfortunately seems to have held sway as the main determinant of his brand’s trustworthiness.

Indeed, it even elevated him to one of the new figureheads for the whole industry.

In his downfall, though, he now serves as a stark embodied reminder of why DeFi (decentralized finance) was born in the first place.

What transpired with Bankman-Fried and FTX serves to underscore the primary importance of simple, good old-fashioned due diligence.

Image, personality and narrative can be seductive, but due diligence should always be enough to steer through their siren song.

Cultivating a culture of transparency

One of the central issues that FTX’s collapse highlighted is the need for rigorous audits and oversight within the cryptocurrency industry.

Prior to the bankruptcy, at least four CPA firms were involved with FTX – two of…