Binance/FTX: The Duality of Man in a Teetering Industry (December 2022)

 

Binance logo (Image from Binance.com) 

Abstract

Binance, a cryptocurrency market, tried to bail out FTX, a rival crypto market,

after FTX was found to be misusing client funds. Binance backed out of the deal

after realizing how unethical FTX had been to its customers. This caused a big

crash in the crypto market and sent customers everywhere into a frenzy. FTX

then filed for bankruptcy as the SEC and DOJ started their investigations into

the company. The CEO of FTX was arrested, which shined a light on other

industry heads, specifically the CEO of Binance. Nothing incriminating has

been found yet, but customers are still untrustworthy and have been

withdrawing their balances from the marketplace. Binance put a hold on

withdrawals due to the volume. This has led to further questioning of Binance

by the public. 

Ethics Case Controversy

Binance is the largest cryptocurrency market in the world. Its platform

allows users to buy, sell, and trade crypto tokens online and transact and

earn interest using their tokens. Binance has grown tremendously since

being founded in 2017, handling a total of “$34.1 trillion in trading last

year, even while wrangling with regulators.” (Fortune, 2022)

    The man behind the operation is Chinese-Canadian business executive

Changpeng Zhao. Zhao, a McGill University alumn, was relatively unknown

before becoming “as rich as Mark Zuckerberg virtually overnight.”

(Fortune, 2022) He was ranked as high as 30th on the world’s richest person

list with a net worth of $30 billion, but he has since sunk to 136th with a little

over 13 billion.

    Binance made headlines on November 6th when it liquidated all of its

shares of the FTT token, trading platform FTX’s primary token, sending the

crypto industry into a frenzy. Earlier in the week, on November 2nd, a leaked

report showed that the token's value might be fabricated, and Zhao wanted to

get out before losing value. On November 8th Zhao announced that a deal was

made to save rival marketplace FTX, “one of the largest exchanges for digital

currencies, seemingly on the verge of collapse.” (New York Times 2022) It

appeared as though Zhao and Binance would absorb the second-largest marketplace

and their biggest rival, FTX, and firmly cement their place at the forefront of the

crypto industry. However, not even a day had passed before Zhao put out another

statement explaining that the deal had been scrapped due to how uncomfortable

Binance was with FTX’s financial reporting and suspected them of misusing clients'

funds. On November 11th, as Sam Bankman-Fried resigned as CEO of FTX and

filed for Chapter 11 bankruptcy, Changpeng Zhao spoke to reporters about the

collapse of his rival and what it meant for the industry as a whole, “It's devastating

for the industry. A lot of consumer confidence is shaken. We’ve been set back a

few years.” (CNN, 2022) Zhao compared the collapse of FTX to the 2008 global

financial crisis, saying that FTX would not be the only player to fall, just the first.

    The controversy went quiet for over a month; it was unclear what would happen

in the crypto industry or if Sam Bankman-Fried would even be arrested. However,

on December 12th, “FTX founder Sam Bankman-Fried was arrested by Bahamian

authorities Monday evening after the United States Attorney for the Southern District

of New York shared a sealed indictment with the Bahamian government, setting the

stage for extradition and U.S. trial for the onetime crypto billionaire at the heart of

the cryptocurrency exchange’s collapse.” (CNBC 2022) This arrest and extradition

was the first action from The Securities and Exchange Commission and The Department

of Justice to hold someone accountable for this whole financial catastrophe. This arrest

led to another withdrawal frenzy, just like the one FTX experienced, but this time it

was Binance and other smaller crypto marketplaces that were being withdrawn from.

In the 24 hours following Sam Bankman-Fried’s arrest, “$3 billion in net withdrawals

flowed out of Binance, according to blockchain analytics firm Nansen.” (Forbes, 2022)

This rush of withdrawals caused Binance to temporarily halt the withdrawal of USDC,

a crypto token tied directly to the value of the US dollar. This worried investors at first,

but Zhao assured everyone through a series of tweets that the halt was a part of a

“token swap” due to the increase in withdrawals outside of regular banking hours.

Standard functionality resumed shortly after. In the aftermath of the Sam Bankman-Fried

Scandal, critics have pressured Zhao to be as transparent about Binance’s financials as

he has pushed others in the industry to be. Zhao tweeted that liabilities are difficult to

audit publicly but that Binance does not owe money to anyone. Changpeng Zhao and

Binance are not being as transparent as consumers would like, especially at a time like

this, but only time will tell what will happen to them.

Timeline

Stakeholders 

The stakeholders, in this case, include Binance, founder and CEO of Binance:

Changpeng Zhao; FTX, founder and former CEO of FTX: Sam Bankman-Fried; the

Securities and Exchange Commission, The Department of Justice, current and future customers/shareholders, and the general public. Binance would be on top of the

world following this scandal. Their biggest competitor had destroyed themselves, all

they had to do was follow the rules and be transparent, and they would have been set.

However, they made one of the same mistakes they just watched FTX make.

They needed to be more fully transparent with the public. It is not clear what will

happen to Binance in the future, but one thing is for sure, they must regain the

public’s trust. Changpeng Zhao seemed to be a beacon of hope and trustworthiness,

but people are not so sure after his information-withholding tweets about Binance’s

liabilities. Hopefully, he doesn’t follow Sam Bankman-Fried’s path. FTX is all

but dead and buried, they will never be trusted by consumers, and the only course

of action left is for the company to go away forever. Sam Bankman-Fried was a

huge scumbag, not the crypto-guru everyone thought he was. Hopefully, the

Justice Department is harsher with him than they were with the culprits behind

the 2008 financial crisis. The Securities and Exchange Commission has to wake

up and realize how much of a ticking time bomb crypto is a the moment and

adequately regulate it before more scams like this happen. The Department of

Justice has to put the fear of god in the crypto industry and prosecute

Sam Bankman-Fried to the fullest extent of the law. Current/future customers,

shareholders, and the general public have to look at what happened with FTX

and what has already started to get out about Binance and make informed

decisions about whether or not crypto is a wise venture for them. All the

information is laid before them, and they need to put the lust for money on

the back burner and be wise. 

                                            Changpeng Zhao (Image from TheGuardian.com)

Individualism

From an individualist perspective, Changpeng Zhao was ethically incorrect.

He tried to sink money into a failing company to bail out his rival and save

people’s investments. This does not line up with the individualist belief that

“Business actions should maximize profits for the owners of a business, but

do so within the law.” (Salazar, 17) Buying out FTX was not a decision that

would maximize profit, and even after backing out of the deal, he still did

nothing to capitalize on the situation. He also would not give up information

about Binance’s financials when asked, which is between lawful and unlawful,

because he is deceptive. He could have offered consumers a transfer deal from

FTX to Binance to bring in new customers and increase profits. He could have

been transparent about finances to guarantee he says within the law. In the eyes

of an individualist, Changpeng Zhao was unethical; he was deceptive and did

not act to maximize profits. 

Utilitarianism

From a utilitarian’s perspective, Changpeng Zhao’s actions were ethically

beneficial and maximized “happiness in the long run for all conscious beings that

are affected by the business action.” (Salazar, 17) Zhao offered to put his bottom

line “on the line” to buy out FTX and help the affected customers. He may have

been motivated by future profit, but his actions were maximizing happiness

nonetheless. Binance’s actions would be lumped in with Zhao’s and seen as

ethically beneficial. FTX’s actions would be seen as unethical.

Sam Bankman-Fried’s actions would be seen as unethical and minimizing happiness.

The SEC and DOJ would maximize happiness for customers/shareholders and

the general public but minimize happiness for FTX, Sam Bankman-Fried, and

arguably the rest of the crypto industry. I believe they would still be viewed as

ethical. The current/future customers, shareholders, and the general public would

come away from the situation feeling net positive about the whole ordeal because

of more awareness and better regulation of the crypto industry.

 

Kantianism

    Kantianism, developed by Immanuel Kant, an 18th-century philosopher

from Prussia, is a philosophy focused on “the moral permissibility of the action,

as well as the moral worth in the motivation of the action.”(Salazar, 21) The

categorical imperative is the central concept of Kantianism, a test used to evaluate

if an action is morally acceptable. The most basic version of the categorical

imperative is the “formulation of humanity,” which states that actions are morally

unacceptable if people are used as a means to an end. A Kantian would view

Changpeng Zhao as ethically correct because he did not use people as a means

to an end. Sure he has not been as transparent as people would like, but as far

as we can tell, he has not been malicious or used people as a means to an end.

A Kantian would have no issue with Changpeng Zhao’s actions and consider

him ethical. 

Virtue Theory

Virtue theory, developed by the Greek philosopher Aristotle, is a philosophical

tool used to determine “a person’s character and assesses whether a person is virtuous

or not. Is the person getting better in life, flourishing, and fulfilling his or her purpose

in life, or not?” (Salazar, 23). Examine the actions of the person in question and

determine if they match up with particular positive ‘virtues’ or harmful ‘vices.’

This can give you much helpful information about them. There are four main or

‘cardinal’ virtues; courage, temperance, justice/fairness, and honesty. Courage focuses

on standing up for the right things. Changpeng Zhao stood up for the people when

he offered to buy out FTX, so he would be considered virtuous. Temperance focuses

on moderation in action and being realistic. Changpeng Zhao knew it was too risky

to follow through with the buyout and could jeopardize his own company; therefore,

he would be considered virtuous. Justice focuses on suitable products and good practices.

Binance was the most prominent crypto marketplace and offered all the features

a customer could ask for; Zhao would be considered virtuous. Honesty focuses on

being truthful with the general public, your customers, employees, and other

businesses. Changpeng Zhao has not been as open and transparent as the public

would like him to be and would not be considered virtuous. The Virtue Theory

would consider Changpeng Zhao as virtuous overall. 

Justified Ethics Evaluation

After studying the FTX and Binance sides of this case, I am ashamed to have

been so naive when I did my paper on FTX and Sam Bankman-Fried. It is clear

now that he was highly unethical, and I was too scared to condemn him then.

I can’t believe I was against jail time for SBF and the other executives involved.

Regarding Changpeng Zhao, I agree with the ethics evaluation and believe

him to be an ethical person. He is on a slippery slope, though. If he doesn’t

become more transparent and be proactive in conforming to new regulations, he

will get burned as well. Watching this situation unfold in real time as I completed

these reports was unbelievable. I never thought Sam Bankman-Fried would be

brought to justice while I was still working. I hope I am not wrong about

Changpeng Zhao, like I was wrong about SBF. He should be investigated

thoroughly due to his involvement and clean up his act so that consumers

are better protected. I am sure that the proper regulations will be created due

to this fiasco.

                                    Sam Bankman-Fried arrested (Image from cryptotimes.io)

Conclusion

The public can rest easier tonight knowing there was justice in this case;

Sam Bankman-Fried will be punished for his actions. It is unclear who will join

him or what his punishment will be, but the crypto industry will be better regulated;

as a result, further protecting future customers. Unfortunately, only some people are

walking away from this scandal better off than before, but there will be correct laws

going forward. As far as we can tell, the head of the crypto industry still standing

is ethical and a much better person than SBF; hopefully, it stays that way.

References

Walt, Vivienne. “He Became as Rich as Mark Zuckerberg Virtually Overnight. How Binance Founder 'C.Z.' Zhao

Became a $74 Billion Man While Moving Fast and Breaking Things in Crypto.” Fortune, Fortune, 30 Mar. 2022, https://fortune.com/longform/binance-changpeng-cz-zhao-net-worth-crypto-exchange-trading/.

Yaffe-bellany, David, and Erin Griffith. “Crypto World Is Rocked as World's Largest Exchange Rescues Rival.”

The New York Times, The New York Times, 8 Nov. 2022,

https://www.nytimes.com/2022/11/08/technology/binance-ftx-deal-crypto.html.

Egan, Matt. “Crypto CEO Warns His Industry Faces 2008-Style Crisis, Calls Regulator Scrutiny 'a Good Thing' |

CNN Business.” CNN, Cable News Network, 11 Nov. 2022,

https://www.cnn.com/2022/11/11/business/cz-crypto-crisis/index.html.

MacKenzie Sigalos, Rohan Goswami. “FTX Founder Sam Bankman-Fried Arrested in the Bahamas after

U.S. Files Criminal Charges.” CNBC, CNBC, 14 Dec. 2022,

https://www.cnbc.com/2022/12/12/ftx-founder-sam-bankman-fried-arrested-in-the-bahamas-after-us-files-

criminal-charges.html.

Ashmore, Dan. “Is Binance in Trouble?” Forbes, Forbes Magazine, 15 Dec. 2022, https://www.forbes.com/advisor/investing/cryptocurrency/binance-crypto-crisis/.

“Changpeng Zhao: Tech Chief in the Eye of the Cryptocurrency Storm.” The Guardian, Guardian News

and Media, 25 June 2022, https://www.theguardian.com/technology/2022/jun/25/changpeng-zhao-tech-

chief-in-the-eye-of-the-cryptocurrency-storm.

“Binance Blog Articles.” Binance Blog, https://www.binance.com/en/blog.

“SBF Arrested in Bahamas, Set to Be Extradited to Us.” The Crypto Times, 13 Dec. 2022,

https://www.cryptotimes.io/sam-bankman-fried-arrested-in-bahamas-set-to-be-extradited-to-us/.

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.