FTX’s downfall remains a stark reminder of the risks of unchecked ambition and poor governance in the crypto industry. The collapse wiped out over $200 billion in market capitalization and shattered public trust, reinforcing concerns about fraud and instability. As the next bull run approaches, industry leaders must implement stronger governance, transparency, and responsible marketing practices to avoid another crisis.
Learning from Past Failures
The crypto industry has faced similar crises before. The 2014 Mt. Gox breach and the 2017–2018 initial coin offering (ICO) boom showcased vulnerabilities stemming from a lack of oversight. While some projects in the ICO era operated in good faith, regulatory uncertainty led to widespread disruptions. The U.S. Securities and Exchange Commission’s (SEC) report on The DAO, which classified ICOs as securities, triggered a market collapse, affecting both legitimate and fraudulent projects alike.
Despite regulatory unpredictability, crypto companies can take proactive steps to ensure stability and investor confidence. Strengthening governance structures and financial transparency should be priorities to prevent another catastrophe like FTX.
Strengthening Governance and Transparency
Upcoming regulations, including potential SEC reforms in 2025 and new frameworks in Europe and Asia, will help shape a more structured crypto landscape. However, while these rules take effect, industry leaders must set their own standards.
- Adopting Financial Transparency: Regular financial disclosures, proof-of-reserves audits, and transparent quarterly reports should become industry norms. Companies like Coinbase and Kraken have already implemented these practices.
- Integrating Traditional Finance Expertise: Hiring experienced executives from traditional finance (TradFi) can bring valuable risk management and compliance knowledge.
- Decentralization with Accountability: While decentralization is a core tenet of crypto, it should not come at the expense of accountability. Transparency and governance must coexist with decentralization.
Reducing Dependence on “Main Characters”
FTX’s collapse was largely due to excessive centralization of power in one individual—Sam Bankman-Fried. His influence led to poor decision-making, ultimately dragging down the entire ecosystem.
This issue extends beyond crypto. A study published in the Berkeley Business Law Journal highlights how over-reliance on celebrity CEOs can weaken corporate governance. WeWork’s Adam Neumann and Theranos’ Elizabeth Holmes are prime examples of the risks associated with unchecked executive power.
The crypto industry continues to elevate individual figures, such as Ethereum’s Vitalik Buterin or Solana advocate Mert Mumtaz, allowing their statements to significantly sway market sentiment. While visionary leaders are important, sustainable projects must distribute decision-making across teams to ensure longevity.
Moving Beyond Celebrity Endorsements
The reliance on celebrity endorsements to drive legitimacy must end. FTX paid millions to figures like Tom Brady, Gisele Bündchen, and Stephen Curry, creating an illusion of credibility. However, when the exchange collapsed, these promotions fueled public distrust.
Crypto projects should shift toward engaging credible industry experts rather than relying on high-profile influencers. Thoughtful, transparent marketing that educates investors will build long-term trust more effectively than short-term celebrity hype.
Preparing for the Next Market Cycle
The next bull run will introduce new audiences and applications to the crypto market, amplifying both its potential and vulnerabilities. To avoid another disaster, industry leaders must uphold ethical standards, enforce financial transparency, and reduce reliance on individual personalities. The lessons from FTX’s collapse must guide crypto into a more responsible and resilient future.
