Venture Capital Firms: Rash Investing in FTX (2022)

 

(Larg investor of FTX)

ABSTRACT

            In the world of crypto currency and venture capitalist firms,’ ethics is not a term you might think of being especially important. Mr. Bankmen CEO of FTX swindled investors and mismanaged billions of customers money and eventually caused the failure of his company.  FTX and venture capitalist both fail when you grade them against the theory of individualism, they may have not broken laws, but they did not maximize profits. When FTX collapsed in on itself it also took with it many peoples life savings with it and with that their dreams and happiness there for FTX and venture capitalist fail to pass the ethical theory of Utilitarianism. Mr. Bankmen and the venture capitalist were motivated to make as much as possible and to them it did not matter so they were not motivated to do right because it is right, so they fail the theory of Kantianism. If businesspeople always used ethics to help them make their decisions events like the failing of FTX could be avoided.

ETHICS CASE CONTROVERSY

It all started when a Bahamas based cryptocurrency exchange company, FTX, was founded in May 2019 by Sam Bankmen. In the world of cryptocurrency Mr. Bankmen was seen as a savant that had complete understanding of the new and uncharted market of cryptocurrency. FTX’s goal was to try to make an easy and safe way for people to buy and hold and sell cryptocurrency. At their peak, they had over a million users. Sam Bankmen marketed his company aggressively through numerous different commercials. They ranged from comparing FTX to every major invention in history to having professional athletes endorse the company.

(FTX ad ran at the super bowl)

The ads put an emphasis on how safe and easy it was to use and now looking back at these statements it is extremely ironic. Mr. Bankmen’s aggressive marketing tactics also crossed over into his strategies when finding investors. His so-called pitch to potential investors was not really a pitch but a take it or leave it offer. Investors that heard Mr. Banksmen’s pitch stated that Mr. Bankmen believed that investors should only support and observe. This is where the FTX’s story becomes strange. Investors, after hearing Mr. Bankmen’s pitch, did not completely avoid this company like the plague but even more surprisingly invested with extremely little research into the company. The large venture capital’s firms that were investing should have the experience and knowledge not to just trust a person’s word but to conduct in depth research. It seems that they were blinded by the opportunity to be an early investor in a new market the New York Times said, “Investing in FTX gave them a piece of the hottest start-up in an emerging sector that promised to be as big as smartphone apps or the internet itself.” (Griffith, Erin, and David Yaffe-Bellany) New York Times, 11 Nov. 2022). Venture Capital firms completely went away from their due diligence and hard-core review procedures that they got involved in when it came to FTX. They fell in love with this “unique” investment, and it ended up having a detrimental impact on their balance sheets. If investors took the time to investigate FTX’s company’s practices, they all would have turned away from the potential investment. Mr. Bankmen also was the CEO of Alameda Research which is a trading firm that came out November 2, 2022. This trading firm held five billion dollars’ worth of FTT coins, these are FTX’s own coins, and this discovery served as the spark to the powder keg that was FTX. On November sixth the world’s largest crypto currency exchange, Binance, said they were going to liquidate all the holdings of the coin FTT due to their concerns about risk management. This news sent shock waves throughout the crypto currency world causing mass liquidation of the coin. The problem with that is FTX did not actually have the money to give back and found itself in a crisis where they needed to find six billion dollars to give back to customers. During this the price of a FTT coin plummeted eighty percent in just two days. FTX started to look for ways out of the situation they found themselves in, so it had turned to one of its competitors. Binance announced on November eighth that they had made a deal to acquire FTX. They also released that it was still non-binding and did not release the purchase price. After this announcement FTX was going to be bailed out from the predicament that they had gotten themselves into. Only a day later, on November ninth, Binance announced that they would be pulling out of the deal due to their concerns on how the company was run and most importantly how the customer’s finances were being handled,  John J. Ray III a CEO who specializes in bankruptcy had this to say "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," Ray said in a filing on Nov. 17(O'Halloran, Suzanne O'Halloran Fox Business, 28 Nov). This action thrust FTX back into its original position but with the add on of people questioning how their money was managed. November tenth the Bahamas securities regulator froze the remaining FTXs assets and California Department of Financial Protection, and Innovation started an investigation. Mr. Bankmen also took to twitter to inform the world that FTX did not have the capital to fulfill all the customers’ requests. He blamed the over leveraging of the company on “poor internal labeling.” (REIFF, NATHAN Investopedia 18 Nov. 2022) He also said that Alameda would slow down their trading. On November eleventh Mr. Bankmen would step down from his position as CEO and John J. Ray III would take his place as well as the company filing for Chapter 11 bankruptcy protection. When this was filed one hundred and thirty other companies were engaged in the proceedings. Soon after the filings took place, FTX stated that they were victims of “unauthorized transactions.” Third party business analysis believes that in a hack four hundred and seventy-seven million dollars was stolen. After this was discovered, the Securities Commission of the Bahamas, decided on November 18^th that FTX had to move all crypto assets to the regulator’s wallet to help protect everyone. Currently FTX is involved in civil lawsuits and one class-action lawsuit. The failure of FTX will most certainly leave a permanent stain on the crypto currency market and investors that invested in it without the research to see all the warning signs. Some economists have compared the FTX debacle to the collapse of Enron in October 2021.

(Timeline)

STAKEHOLDERS

(FTX's crypto currency) 

                   All those who engaged in FTX, were left with a bad taste in their mouths and less money in their pockets. The stakeholders that were hurt the most in the fall of FTX was the average person who was trying to invest in their future and ended up losing their hard-earned money, like Terri Smith an architect in Seattle who may have lost everything from this situation. Investors are left with depleted accounts and a limited hope of getting anything back once the bankruptcy proceedings happen. FTX did not only burn regular investors, but they did so to many venture capital firm such as Temasek and Sequoia, which stand to lose large amounts of capital.

INDIVIDUALISM

(Past CEO of FTX)

When you look at the case of FTX and the Venture Capital firms that were involved through the scope of individualism, it is hard to fully explore with the information that is currently available. At the time of this writing there are no criminal charges brought against any FTX employees. This lines up with one of the main points of individualism of attempting to maximize profits while staying within the laws. In this instance, FTX was attempting to create the most profit it could and just ended up failing. As far as we know, no laws were violated therefore FTX played by the rules of individualism and just unfortunately went under. When looking at the venture capitalist firms and how they interact with the ideas of individualism it can be looked at in two separate ways. On one hand an argument can, be made that the firms were trying to stay ahead of technology and become an early investor of a brand-new market and did not know how to research an investment like this. In this way the firm was trying to make the most profit and no laws were broken, therefore they followed the ethics of individualism. On the other hand, it could be said that one of the major jobs of an investment firm is to know every aspect of where their money is invested. They were not looking to make the most profit but were just gambling on the perceived golden boy of the crypto world. As of now, FTX only halfway follows the ideas of individualism by failing to maximize profits and the investment firms that invested without investigating the company that they invested in, did not follow the ideas of individualism due to their oversight not only not maximizing profit but actually minimizing it. The massive investments by the Venture Capital market inadvertently represented to the average investor that this was a “solid” investment based on the regular principles usually adhered to by them.

UTILITARIANISM

Looking at FTX and all its doings, it is quite clear that this business was not run under the ethical guidelines of utilitarianism. Utilitarianism is the middle ground between egoism, where you are only looking out for your own happiness and altruism, where you only look out for others happiness. When a company is operated under the guidelines of utilitarianism, the company is not only looking out for themselves but also for everyone involved. FTX showed, with their less than desirable management of themselves and their customers’ investments that they were only looking out for themselves. When Mr. Bankmen did not allow anyone else to help make decisions on his company’s board, he embodied an egoism ethical standpoint and was only looking out for his own interests. The way Mr. Bankmen conducted himself outside of his business also shows that he was only looking out for his own happiness when he used his image as a crypto golden boy to convince investment firms to blindly toss money at his company without proper research. Mr. Bankmen does not fit into utilitarianism clearly and he was known to only be looking out for his own happiness not the happiness of his users or investors. His willingness to lie and swindle people to complete his own agenda of making the most profit for himself proves this. His ethics fit an egotist model due to the fact he was only concerned in what happened to him and not how any of his own actions affected anyone else. Venture capital firms that heavily invested should have been able to see that the CEO of the company they had invested in only cared about his own net worth and happiness and did not care how he increased it.

KANTIANISM

                        Kantianism is an interesting way to approach a business ethical dilemma. Kantianism is based around acting rationally, helping, and allowing people to make their own decisions, respecting people’s decisions and everyone’s individual needs. Finally, to be motivated to do the right thing because it is right. Mr. Bankmen and FTX, under the light of acting rationally did not act in a rational manner, when Mr. Bankmen refused to allow outside help of people that have more experience that could have helped him avoid running his business into bankruptcy. During the operation of FTX people were allowed to make their own decisions if they wanted to invest or if they did not, but Mr. Bankmen did not help them by withholding invaluable information on how FTX was being run and how FTX sister company Alameda held five billion dollars’ worth of FTX own coin. This information would have most certainly changed how investors would have made their decisions, therefore FTX did not allow investors to make their own decisions but coerced them into a decision by withholding essential information about themselves. The only point where a case could be made in FTXs favor, is that they respected people’s decisions and needs. Investing always has an inherent risk involved in it so when a person invests their money in any investment, they also must accept all the risks involved in it as well. In this way, FTX respected everyone’s decisions of taking a risk in this situation. It just did not pan out in a favorable fashion. If you look at the motivations of FTX it is crystal, clear that they were not motivated by the right thing but were motivated to just make the most profit for themselves no matter the amount of people that would be burned by their business plan. They were not motivated to help their investor’s or to improve the new emerging market space, which is crypto, therefore they were not motivated to do the right thing because it is right. Mr. Bankmen did not use Kantianism ethical guidelines to help run his company.

VIRTUE THEORY

                       Some people would describe FTX as generally distrustful and dishonest. Learning and moral leadership are not terms that are used to describe FTX. It is quite the opposite. If you want to look at FTX as a trustworthy company, you must do your proper research on who runs the company and that is Mr. Bankmen. This individual was also the CEO of another investment company. This company also held five billion dollars of the crypto coin FTT. FTT is FTXs own crypto currency made for their exchange in most circumstances this would not be a problem but both companies shared a CEO. This was seen as an extremely shady way to do business and was done to boost the perceived numbers of their own coin. When looking to see if this is an honest company, you must look at how they managed users and how they secured investments for themselves. FTX was well known for partnering with many super star athletes such as Shaquille O'Neal, Trevor Lawrence, David Ortiz, and Tom Brady and even running a Super Bowl ad. The ads that FTX released to the public openly stated how easy and safe their platform is. The ads were not honest to their customers about all the risks involved in investing but made it sound like there was no risk and that anyone could do it with no research on what they were doing. Hearing investors stories that heard Mr. Banksmen’s pitch to invest in his company all share the same few traits. The pitch was often described as not a pitch but a take it or leave it offer to the investment firms and Mr. Bankmen felt strongly against having outside help when making decisions about the company. FTX was extremely dishonest and used the inexperience of the investment firms in the crypto currency market to pull the wool over their eyes and take them for a ride. They had no say in it. Mr. Bankmen was notorious for refusing to allow investors a spot at the table to voice the ideas and concerns. He would not learn from people that had more experience, which could have made the company better, but he remained stuck in his ways and would not accept the help offered. The moral leadership of Mr. Bankmen is not present at any of his companies that he ran. He did not care about anything but how to increase his personal net worth.

JUSTIFICATIED ETHICS EVALUATION

            When you are running an investment firm whether that is in regular stock and securities or forging a path into a new and unclaimed market of crypto currency, the goal should be the same and it is to provide a trustful experience. FTX and Mr. Bankmen failed to provide anything that is even remotely related to the word trust. From the start Mr. Bankmen used extremely aggressive and questionable business tactics. Mr. Bankmen was a predator to all his customers with his promise of a safe exchange platform, but he was unable to provide this. He was unable provide this due to his perceived expertise and not allowing investors to have a say on the decisions with the company and provide insight from there past experiences. The incident that kicked off oversight and poor management was that Mr. Bankmen caused the failure of the company. It was even stated in a tweet that “poor internal labeling” was the cause to all the leveraging and liquidity problems that tore apart the company. If Mr. Bankmen allowed his investors, that have had countless years of experience to help him, I believe that he would have a trustful strong company that is opening a new market and giving everyone the ability to invest with it. If you were to look at it from Mr. Bankmen’s perspective, it might seem a little different. He could have viewed this situation as no one has experience running a company in a crypto currency company and his aggressive business practices could just be him fully believing that he is trying spread the new world changing innovation. In the end Mr. Bankmen and FTX did not follow any ethical guidelines and were only looking out for themselves. It did not matter who they destroyed in the rise to the top. 

CONCLUSION

The way business was conducted for everyone involved in FTX was an unfortunate display of what happens when business is done in complete disregard of any ethical thought. Mr. Bankmen’s desperate crawl to the top not only destroyed his dream of a safe and easy crypto currency exchange but also installed a new distrust for the whole market of crypto currency. It also made venture capitalist firms extremely weary of supporting any of these companies in the future. This will stunt the growth of this new market and limit new innovations in this field. In the end, the way FTX treated their customers and investor’s put a negative view on their whole industry and it all could have been avoided if any ethical thought were used.

 

REFERENCES 

Griffith, Erin, and David Yaffe-Bellany. "Investors Who Put $2 Billion Into FTX Face Scrutiny, Too." The Collapse of FTX, The New York Times, 11 Nov. 2022, www.nytimes.com/2022/11/11/technology/ftx-investors-venture-capital.html.

REIFF, NATHAN. "The Collapse of FTX: What Went Wrong with the Crypto Exchange?" , edited by VIKKI VELASQUEZ, Investopedia, 18 Nov. 2022, www.investopedia.com/what-went-wrong-with-ftx-6828447#:~:text=Cryptocurrency%20exchange%20FTX%20collapsed%20in%20early%20November%202022,portions%20of%20the%20company%20but%20quickly%20backed%.

 

Taranto, Steven, and Isabel Gonzalez. "FTX collapse: Tom Brady, Stephen Curry, Shohei Ohtani among sports figures named in class-action lawsuit." , CBSSPORTS, 16 Nov. 2022, www.cbssports.com/nfl/news/ftx-collapse-tom-brady-stephen-curry-shohei-ohtani-among-sports-figures-named-in-class-action-lawsuit/#:~:text=Those%20three%20are%20part%20of%20a%20group%20of,who%2.

Peterson-Withorn, Chase. "Exclusive: These FTX Investors Stand To Lose The Most From The Crypto Exchange’s Implosion." The fall of FTX, Forbes, 10 Nov. 2022, www.forbes.com/sites/chasewithorn/2022/11/10/exclusive-these-investors-stand-to-lose-the-most-from-ftxs-implosion/?sh=1c04ca326700.

ROBERTS, JEFF J. "SBF in criminal jeopardy: How and when he could face justice." , Fortune Crypto, fortune.com/crypto/2022/11/18/sbf-in-criminal-jeopardy-how-and-when-he-could-face-justice/.

 

O'Halloran, Suzanne O'Halloran. "FTX bankruptcy unique, losses hard to determine: Ken Feinberg." , Fox Business, 28 Nov. 2022, www.foxbusiness.com/markets/ftx-bankruptcy-unique-losses-hard-to-determine-ken-feinberg.

 

 

 

FTX: The Downfall of Cryptocurrency (2022)

FTX: The Downfall of Cryptocurrency (2022)

Abstract

Cryptocurrencies have a history of some shady backgrounds behind them. Some companies have ties with questionable leadership or ethical dilemmas. FTX is a perfect example of a cryptocurrency that is currently crashing because of ethical issues that lead to investors as well as competitors questioning the legitimacy of the company. There are many different examples of ethical theories that can apply to the company FTX such as Individualism, Kantianism, Virtue Theory and others. When a person can apply these things to a company it is not a good thing because it means the company is going through some kind of questionable decision making. This can affect the company in a major way because it leads to people not trusting them with investors' money. These theories can demonstrate to investors whether or not they should continue to put their money in this company. If they decide to pull out, it causes a major crash in the market.

Ethics Case Controversy

FTX is a cryptocurrency that is currently struggling mightily in the market. The stock has gone down 94% in the last month and is continuing to fall. All of this has begun to happen because of news breaking about the company misreporting funds. Founder Sam Bankman-Fried created FTX in 2019 and it quickly outgrew what was expected of the cryptocurrency. The company grew so large it was able to purchase time for a super bowl ad, had their name on a college football field and a NBA court, and the founder was featured in The New Yorker and Vogue. As quickly as the company rose, they fell even faster. On November 8th, 2022 FTX was falling so far in the market another rival company announced they planned to buy it out. Binance, one of the largest crypto exchanges in the world, had announced they planned to buy their competitor out and take over. This deal was set to go through until a crypto publication called CoinDesk came out with a report explaining how the sister company of FTX was looking at some trouble. Alameda Research is a hedge fund that Bankman-Fried founded before FTX. This hedge fund had a large portion of their assets in a cryptocurrency called FTT which was created by FTX for traders to use when going on their platform. When CoinDesk came out with this report it was feared that since FTX was dropping in price it would lead to a major problem for Almeda Research as well. After the details about this came out Binance decided they did not want to purchase FTX anymore which led to some public issues between Binance owner Mr. Zhao and FTX owner Mr. Bankman-Fried. While all of this was going on investors began to pull out of FTX as much as possible. After Bianance announced they were no longer purchasing FTX, the stock dropped about 63% in just 24 hours. As of today, November 21, 2022, the stock has dropped about 94% since the original report came out. People began to worry this was going to be one of the next big Crypto collapses, so investors withdrew over $1.2 billion from FTX holdings. Binance also later announced they were going to sell all of their holdings in FTT because of these recent issues. Mr. Bankman-Fried has been trying to keep the public calm during this entire situation by saying “ A competitor is coming after us with false rumors, FTX is fine. Assets are fine.” (New York Times) Binance is also not a stranger to scrutiny because they have had issues in the past with the Securities and Exchange Commission, as well having many 

details about their business hidden for years. Through all of this trouble FTX has been able to stay afloat because it is backed by some major investors including Sequoia Capital and SoftBank. The company was able to raise nearly $2 billion in funding from these investors. They came out with a statement talking about how they were shocked by the way Binance wanted to take over the company and did not see it coming. In an email to investors, Bankman-Fried said stockholders were his second priority and the first was protecting the industry and customers. He later apologized in this email and said he understands he needs to do better. In a memo to the FTX staff he said more information will be coming in the future and he was to continue to grow the company together.

Stakeholders

There are a couple different stakeholders that are involved in this case. The first example of a stakeholder would be the people who are working in the company. These people have a major stake in the success of FTX because they are counting on that company for their jobs so they can survive. If the company goes under, their lives are going to change drastically because they will be looking for a new place to work. Another example of a stakeholder in this case is all of the people that are invested in FTX. These people have money on the line and the more the stock goes down, the more money they are going to lose. They want to see the company succeed as much as possible so they can make as much money as they can. One last example of stakeholders in this case would be other companies involved in the cryptocurrency market. They are stakeholders because when people see FTX crashing it begins to affect the rest of the market as well. People worry the rest of the market is going to crash like FTX is so they decide to pull money out of other cryptocurrencies as well.

Individualism

Individualism can clearly be demonstrated in many companies around the world on a daily basis. The idea behind individualism is each business has the end goal of making a profit. Businesses will do anything they can to achieve that goal because they want to maximize the profit for all shareholders in the company. That would be their only obligation to everybody. The only catch with this is it has to be within the law. Some businesses take that very seriously but others appear to have problems staying within the law. FTX is walking a fine line when it comes to this because their obvious goal as a company is to maximize all the profits they can, but they have done some things that can be debated whether or not it was ethical. As a company they have not done anything illegal yet, but some of the decision making from their owner has been very questionable as of late. Having his hedge fund own a large amount of FTT is not illegal but is not considered the most ethically correct decision he could have made. His goal of this was to maximize all of the profits he could for the business but he is doing it in a questionable manner. The problem with Friedman’s theory of Individualism in this case is it does not take into account the identity of each company individually. FTX is a company that wants to do all they can to achieve their goals of growing as a company. Some of their core values may get put in the rear view mirror along the way because they know doing the right thing will not always bring them the most success. They tried to do what they needed to so they could get a strong business that continues to grow but their ethical decisions in this area have begun to lead to the downfall of their company. It has led investors to pull money out of the company and has caused a major drop of their stock price. If they truly followed the ideas of individualism they could have been more successful in the long term rather than having short term success but then falling is a massive way.

Utilitarianism

Utilitarianism is another ethical theory that somebody could say had a major impact on FTX as a company. This definition of utilitarianism is “Utilitarianism tells us that we can determine the ethical significance of any action by looking to the consequences of that act” (DesJardins 30) The goal of this ethical theory is to maximize the overall good as much as possible in any decision a company makes. A company is trying to produce the greatest amount of good for the largest number of people when they are considering this theory. This is something FTX needs to consider more when making decisions as a company. The choices they make might provide success for themselves in the short term, but do not provide much good for everybody else that is associated with them. The choices made by Mr. Bankman-Fried caused many investors to pull money out of the company because they do not believe he is doing a good thing for everyone. They believe he is just trying to set himself up rather than doing good for a large number of people. If he paid more attention to the meaning of Utilitarianism he could have been more successful for a much larger number of people. If his decisions were based more on the success of everybody the company could have continued to grow for many more years in the future rather than falling like it is now. The issue with Utilitarianism is it is hard to actually find a way to measure this good. People say the good should lead to happiness for all parties but how can one measure that? This could be a reason why FTX did not take this theory more into consideration because they did not know how to measure the results. Investors being happy with something does not always relate to how they manage their money so the company would not be able to measure their success with Utilitarianism based on that idea.

Kantianism

Kantianism is another major theory in business ethics that many businesses consider in today's world. Kantianism has a couple major rules that play key factors in decision making. The first rule is to act rationally and do not consider yourself exempt from any rules. The second is to allow other people to help you make any decisions that need to be made. The third is to respect people and their own individual needs. The final rule is to be motivated to achieve your goals for the company. FTX appears to have taken some of these rules into consideration but not all of them when going through business decisions. For example, FTX as a company was clearly motivated to succeed and they would do whatever is necessary to get the best result for their company. However they also did not consider some of the other rules such as acting rationally and letting others help make any major decisions. It is safe to say the decision of Mr. Bankman-Fried’s hedge fund owning a large majority of FTT was not a rational decision. If he took the time to sit down and look at how that would not only affect FTX, but all of the people involved with the company he would not have decided to put that large of an amount of FTT into his hedge fund. He also could have had other people come in to consult on this decision rather than making it all himself. If he had input from others telling him how when that information is released to the public it could have a large backlash on the company, there is a chance he would have decided against the idea and made a different decision. The final rule about one individual being exempt from other rules is something that could be worked on more for the founder of the company. He made some decisions that focused mainly on himself and made it look like he did not have to take any input from others or consider others in his choices. This is a clear example of him thinking he is too good to follow all of the rules that relate to Kantianism.

Virtue Theory

Virtue theory is another theory that talks about the good and how choices and actions can affect that. The idea behind this theory is it is not enough to just understand what the correct actions or virtues are, but they need to be regularly practiced. A company needs to make the decision about what the right thing to do in any situation is and they need to stick by the choice they make in the future. One way this can happen is having a person model themself after others who have had success in this area before them. For example, if Mr. Bankman-Fried decided to model some ideas for his company from another company that is known to be successful in areas such as being environmentally friendly, giving back to the community, or continuing to grow the field of work they are in by creating more jobs for people. Making good choices like these that affect people in a positive way would be something that FTX could greatly benefit from as a company. FTX has been hit with a lot of bad PR lately which has led to them losing lots of money from investors. This is all happening because of some poor decision making by the founder of the company. If FTX started getting in the news for something good like the examples listed prior, people's confidence in the company could grow back to where it was originally. FTX could begin the practice of making good decisions that lead to a large amount of good for many people and the company could begin to change the narrative currently going on in the media. These practices could also begin to turn around the company's history of poor decision making. If one begins to practice good virtues on a regular basis, it begins to become a habit. These habits always lead to a larger amount of good for a larger number of people rather than focusing on the success of just the company themselves.

Justificated Ethics Evaluation

FTX has a history of making decisions that are considered questionable. The founder of the company, Mr. Bankman-Fried, has made some choices that appear to be what is best for his own gain and not what is better for everybody else that is involved with the company. His obvious goal is to make the largest possible profit for the company because it leads to him getting the biggest personal gain. But some of the decisions he has made has led to the downfall of the company as well as losing money for many investors. The biggest example of this is his hedge fund owning such a large majority of FTT. This led to short term success for FTX because they were able to move a large portion leading to a large profit, but when the news came out to the public it was a major red flag for investors and opposing companies. This led to Binance deciding against buying out FTX while their stock was plummeting because investors were pulling out millions of dollars everyday. The decision that was made was not an ethical choice because it did not provide a large amount of good for a large number of people. It only provided short term success for the company and himself. His argument with the owner of Binance in the media also did not help his company at all because it made them look bad on a national spotlight for everybody to see. Overall this company has made choices in their past that would not be considered ethical and it had clearly led to the downfall of their stock. They continue to fall everyday because of the poor choices that were made by their founder.     

Conclusion

FTX is a company that had so much potential to grow and become a stable in the Cryptocurrency world. Sadly all of that potential appears to be going in the wrong direction because of poor decisions made by the founder of the company. Not only did Mr. Bankman-Fried lose money for tons of people invested in his company, he lost money for all of the workers and himself as well. If he considered more ethical theories when he was making all of the decisions that would drastically affect the company, he could have been more successful in the business world.

Tyson Foods Inc: Coronavirus Cash Betting Pool (November 2020)

Abstract 

Tyson Foods INC is the second largest corporation that processes meat like pork, chicken and beef. The company was founded in 1935 and was based off of Arkansas.  .  

The most recent controversy in (November of 2020) that the company has been in, is that one of the managers at their meat plant location in Iowa has place a cash in betting pool amongst employees to see how many workers would get diagnosed with COVID-19. According to CNN there is allegedly one thousand positive cases for COVID, and five deaths with a total of three thousand employees at the Iowa meat plant location.  

 Out of the five deaths, one of the families decided to pursue a wrongful death lawsuit with the company. The manager at the Iowa meat plant location has also instructed supervisors to continue coming into work, despite the fact that they had symptoms of the virus. Employees also mention that they were not provided with the correct equipment, and failed to impel the act of social distancing. Employees working for this location had mentioned that they believe that the company did not care for their health as much as they should have. The CEO, Dean Banks has acknowledged these accusations and has stated that the leadership in the Iowa location does not symbolize who they are as a whole company. Dean Banks also mentioned that he plans to take action on these supervisors and have them suspended without pay, and have the Iowa meat plant location under investigation. 

Case Overview 

Tyson foods has been distributing meat throughout the United States for years, they are the second largest food processing company. They also distribute the largest percentage of meat. The company itself claims to be “meat leaders” who provide quality and convenience through their products.  The company has a revenue of about $42.4 billion with most of the profit coming from their prepared frozen foods. They have about one hundred and forty thousand employees and forty-two distribution centers.  

Case Controversy 

We are all aware of the Coronavirus pandemic, and we all know that we are told to follow specific guidelines to keep everyone safe and healthy. Especially now since there is   

another rise in positive cases for the virus. Dean Banks, the CEO of the company has promised to provide his employees with safety equipment and procedures to keep everyone employed with the company safe and healthy. Although Mr. Banks spoke about safety guidelines and regulations back in early March, one of their Meat plants in Iowa completely ignored these rules. In (November of 2020) the leadership in the Iowa meat plant location has affected the company as a whole.  

The managers at this location had placed a betting pool on how many employees would test positive for the Coronavirus. The manager at the Iowa Meat plant location goes by the name Tom Hart is the mastermind behind the cash in betting pool. Supervisors were also advised to ignore any symptoms and come into work, and did not advise safety regulations as frequent as they should. The Tyson Foods Chairman, John Tyson, and local managers Cody Brustkern and John Casey have also allegedly told other supervisors to ignore symptoms and said to them, “You have a job to do”. Various employees have spoken up about lack of care for their health. Due to the lack of safety in this meat plant location there has been one thousand positive cases and five deaths. Isidro Fernandez, an employee who worked at the Iowa Meat Plant location passed away back in April due to the lack of safety regulations, and safety equipment provided. His son had filed a wrongful death lawsuit against the company. Although Tyson Food Inc, have been in this scandal President Donald Trump has ordered the meat plants to be open due to the missing numbers of pounds of meat.  

Stakeholders 

In my case study I believe that the major stakeholder would have to be the employees that are employed at the Iowa meat plant location. The employees have been treated very unethically. Safety and health are definitely the main concerns in this time of day, and they failed to meet those expectations. There where deaths caused by these unethical actions and there definitely should be some justice. Another stakeholder in this case study would have to be the CEO of the Tyson Foods.  

Dean Banks himself is a stakeholder in this case because he did do his job by regulating and speaking out about the safety precautions that need to be done to keep everyone safe and healthy. Despite the accusations, he claims that the leadership at this location does not describe the company as a whole. Now that there are controversies and lawsuits being filed, their numbers will definitely decline.  

Individualism 

Milton Friedman is an economist, and a noble prize winner for economics. He claims that the objective for a business owner is to maximize profit for the owner and the stockholders, all while still following the law. Tibor Machan speaks about individualism and puts his input into Friedman’s ideas. He agrees that there is a need to maximize profit but he also mentions that there needs to be indirect goals that do not pertain to profit to reach maximum profit. For my case study, and Individualist would be completely against this situation. By having a manager or supervisor make a bet to see how many people can get hurt does not impact profit at all.  

The leadership at the Iowa Meat plant location did not place small safety goals for the employees to keep the work environment clean. The Iowa Meat Plant location has not only minimized profit for the company but has also been running illegal betting pools within the location. Not following safety regulations for the pandemic is also illegal and dangerous. It is illegal to not follow safety regulations in general especially in a work place that processes food. If anything, having unethical leadership that leads to unhealthy situations and death will do the opposite and minimize the profit for the company. 

Utilitarianism 

English philosopher John Stuart Mill stated, “Happiness or pleasure are the only things of instinct value, we ought to bring about happiness and pleasure in all beings capable of feeling it.”  Meaning a utilitarian would prioritize maximizing happiness for all. Looking at my case study in the eyes of a utilitarian, they would say that this case is super uncalled for and that this company has no ethical values, or morals. There is no maximizing any happiness at all. Nobody will be happy in this situation, employees are at risk for the coronavirus, loved ones have been loss, and even the managers and supervisors running the pool had their jobs suspended. There is no happiness for anyone in this case study.  

Employees are now scared to come to work, and the leaders at the Iowa meat plant location have been suspended without pay. Even the customers will not be satisfied due to the unhealthy working conditions at this location. Nobody would want to purchase their meat at a factory that had many positive cases and several deaths from the coronavirus. Also, the CEO of Tyson Foods INC has got some backlash to this case as well. He now has to deal with the aftermath of this controversy and clean up the reputation of the company. There is no maximizing anyone’s happiness in this case study.  

Kantianism 

Imannuel Kant was the founder of Kantianism, he has specific objectives that allow you to be motivated by actions that are for good will. Kantianism is mainly about making rational decisions and acting accordingly. Acting accordingly to a Kantian is respecting others, being motivated by a good cause, and doing what is right. In a Kantian’s perspective they would say that Tyson Food INC is a horrible company. The betting pool made by managers and supervisors was not motivated upon good will, it is a horrible idea. Not only was it a horrible idea but it was super disrespectful to the employees and their families. Not only is their health being on the line, but now the employees of the company are looked at as a personal profit. Kantians believe that actions that come from a good cause, is the right thing to do and is correctly motivated for the right reasons, but how do we know what is right from wrong? 

Imannuel Kant came up with three categorial imperative formulas to determine if the actions done are rational. The three categorial imperative formulas are the formula of Universal law, Humanity, and Autonomy. You can use these formulas to determine if their actions are morally right, or rational. All three of the formulas have the same outcome, and if your action passes the tests it is acceptable. The Univeral law talks about forbidding all forms of deficit, like lying or manipulation. In this situation this the leadership in the Tyson Food Iowa meat plant location used manipulation to place a betting pool, and manipulate employees to still come in despite their symptoms. The formula for Humanity is more of a concept that makes us look into ourselves for rationality. The formula for Humanity is basically deciding rationality for our own selves. This Iowa meat plant location had all these people in harm of a deadly virus. There was major harm here done to the employees and their loved ones. Also, the consumers have lost their trust and may be at risk as well.  

 The Formula for Autonomy talks about having a moral law for your own self, and that everyone can follow. So, for this case study, the managers and supervisors lied and said that they would all agree to following the safety hazards to keep everyone safe at work when really, they did not abide by the rules.  In the Case Manual by professor Salazar, in mentions “Kant used various formulations of what he called the Categorical Imperative to help people reason well. If the action fails the Categorical Imperative test, then it is impermissible and therefore wrong to do. If it passes, then the action is permissible, or acceptable to do morally.” (page 22) These actions where definitely impermissible and does not meet the criteria of the categorial imperative test.  

Virtue Theory 

According to the case manual by Professor Salazar, the virtue theory was developed by the Greek Philosopher Aristotle. This theory focuses on the characteristics of an individual whereas Kantianism, Utilitarianism, and Individualism all focus on one’s actions. A few characteristics that can help a business grow can be courage, wisdom, honesty, insight, justice, intelligence, and many more. These characteristics can also be known as vices. Vices are the traits of a specific person. There are also bad vices or characteristics that can impact the company as a whole. For instance, my case study has vices that are dishonest, selfish, irresponsible and greed. The managers are greedy and selfish for trying to make money off of sick people and lost loved ones. Making money to maximize their own personal happiness while others are in danger is clearly selfish and greedy. These employees who risk their lives to work also need some source of income, and they should not be afraid to come and work. Tyson food INC is irresponsible for hiring leaders that obviously do not know how to be a leader. The supervisors and managers at the Iowa location are super irresponsible for letting innocent employees become positive for a deadly virus, and even death of some of their employees.  

They also where very dishonest with their employees and customers. One major vice that one should have is trustworthiness. You need to be trustworthy to be trusted, and lying about following safety hazards has caused people in harm and even death. They claim to be following safety guidelines and to take precaution when really employees were told to come into work despite them having coronavirus symptoms, which leads to dishonesty. There are also no justified actions being done, there needs to be justice within a company. Having justice within a business means that there is hard work being done, quality products, good ideas, and fair practices. At the Iowa meat plant location there was lack of good ideas and fair practice. It is never a good idea to put employees at risk of their health and safety especially for personal profit, that is not at all a fair practice. Although I cannot say that these employees do not work hard at this location, I can say that the quality of the products are now going to be overlooked due to the dishonesty.  

Justified Ethics Evaluation 

After analyzing my case and reviewing the case with the theories that where mentioned, I come to the conclusion that Tyson Food Inc has not been as ethical as they should be. The employees at the Iowa Meat Plant location have been treated very badly, and have been disrespected and put in danger for a deadly virus. The leadership at the location have been dishonest, irresponsible and selfish. They should be taking action on safety regulations now more than ever. Not only did they put their employees at risk, but they put their employee’s family, consumers, and the company as a whole in a risky situation. The unethical actions that have taken place at this location have caused people to get sick, and even death. As the company as a whole the revenue for the company will decline and they will have a hard time coming back from this, they need to make a plan to gain profit.  

Company Action Plan 

Tyson Food INC has been around for years, they were founded in 1935 so the company is definitely successful. This recent controversy and lawsuit can cause a bad reputation, but I believe that they can come back from this. The issue is that Tyson Food Inc now has to have redemption from not having safety regulations, and mistreating their employees and putting them in danger. Having a betting pool that puts employees’ health at risk is not only illegal but unethical. As mentioned, Mr. Banks, the CEO of the company has said that the leadership at this location does not define the company as a whole. I believe that they should take a closer look at people who are actually being hired and moving up in the company. Tyson Food INC should also market that they are being safer and following healthy guidelines. They need to have employee and consumer safety, responsibility, and be more cautious with the healthy regulations to be redeemed. I also think that they should be checking in on their locations more frequently than before because of the pandemic. The company should have meetings to clearly discuss safety regulations, and be trained on how to proceed with the new protocols. By making sure that they are hiring trustworthy employees they need to make sure that their leadership is trustworthy as well. As Tyson Food INC controversy came out, they need to create more marketing to showcase how they will be safety processing food for consumers, all while keeping the employees safe and clean.  

At the Iowa Meat Plant location, they should shut down for two weeks, and clean out the area before allowing employees to come back to this site. When they reopen, they must do temperature check ins and have employees be tested for the virus. Nobody should have paranoia coming into work. Human Resources for the company should be stricter about working conditions and making sure that everyone is following safety guidelines. To gain profit after this controversy, Tyson Foods INC show be showing their customers that they are doing the best that they can to keep their work environment clean.  Leadership needs to be stricter about guidelines and safety regulations now more than ever.  

Work Cited 

“What We Do.” Tyson Foods, www.tysonfoods.com/who-we-are/our-story/what-we-do. 

Wiener-Bronner, Danielle. “Managers at Tyson Meat Plant Had Betting Pool on How Many Workers Would Get Covid, Lawsuit Alleges.” CNN, Cable News Network, 19 Nov. 2020, www.cnn.com/2020/11/19/business/tyson-coronavirus-lawsuit/index.html. 

Romo, Vanessa. “Tyson Managers Suspended After Allegedly Betting If Workers Would Contract COVID.” NPR, NPR, 20 Nov. 2020, www.npr.org/2020/11/19/936905707/tyson-managers-suspended-after-allegedly-betting-if-workers-would-contract-covid. 

Salazar, Heather. The Case Manual. 2014. 

“Tyson Food Managers Bet on Workers Getting Covid-19, Lawsuit Says.” BBC News, BBC, 19 Nov. 2020, www.bbc.com/news/world-us-canada-55009228. 

CEO of Tyson Food INC Dean Banks

Employees at Tyson Iowa Meat Plant Location

Tyson Foods INC Iowa Meat Plant location