

others
Lessons Learned – A Year After the FTX Collapse – Crypto News
HodlX Guest Post Submit Your Post
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 onstage alongside Bill Clinton and Tony Blair as at the Super Bowl with celebs like Katy Perry, all of which he voraciously cultivated.
or perhaps just as nerdily uncomfortableSuch 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 which were conducting audits of FTX entities. Yet fraudulent activity went undetected.This raises serious questions about how such critical issues could be overlooked.
Crypto’s fundamental promise is its decentralized nature, designed to empower individuals and eliminate undue influence.
To preserve this core ethos while building trust, the industry should consider measures such as hiring third-party auditors to certify operations.
Regular internal checks could proactively identify and address discrepancies, averting larger issues down the road.
To mitigate such collapses in the future, mandatory holdings reporting, regular audits and transparency regarding ownership and control of crypto exchanges may become necessary.
The evolving regulatory landscape poses challenges for crypto platforms, requiring compliance for differentiation.
Institutional investors are increasingly exploring digital assets, necessitating that platforms offer security, liquidity and financial instruments.
Governments are moving towards clearer crypto regulations, fostering institutional market entry.
One area in which custodians can contribute is to adopt proof-of-reserve programs.
By such programs, businesses holding cryptocurrency create public attestations as to their assets and liabilities.
This demonstrates that crypto held on deposit matches up with user balances.
Proof-of-reserve wouldn’t have prevented FTX’s insolvency, but in a world where such programs become common, any platform’s failure to provide one would raise suspicions.
Another aspect of enhancing trust involves ensuring that firms provide mandatory ethics training for their teams, instilling a culture of responsibility and ethical behavior from top to bottom.
Creating a culture of accountability and vigilance within organizations and protecting whistleblowers would not only help identify problems but serve as another contributor to the fostering of that all-important trust.
What’s the deal with Binance
The FTX collapse is, of course, not an isolated case. Similar patterns have emerged in other industry projects, including Celsius, Voyager Digital and Terra/Luna.
These cases have raised concerns about regulatory compliance, co-mingling of user funds and transparency.
The opacity and financial practices of such projects have highlighted the need for a robust regulatory framework that fosters trust and accountability.
And then there is Binance, the world’s largest crypto exchange
accounting for more than half of all trading volume but with balance sheets as impenetrable as those of Bankman-Fried’s companies before their collapse.Binance discloses no location, revenue, profit, cash reserves or the role of its BNB token.
Unlike its US rival Coinbase, as a private company Binance is not required to publish detailed financial statements, and without raising external capital since 2018, it hasn’t had to share financials with outside investors since then.
The company actively avoids oversight, insulating its main operation from US regulatory scrutiny.
Binance’s financial information is guarded by founder CZ, and even the former CFO did not have access to the full accounts during his tenure.
CZ also declines to publicly identify the entity controlling the main exchange, raising further concerns about transparency.
The SEC in June 2023 sued Binance on allegations of violating federal securities laws by offering unregistered securities to the general public in the form of its BNB token and Binance USD (BUSD) stablecoin.
It would later follow up with further charges, filing a total of 13 against Binance entities and founder Changpeng ‘CZ’ Zhao.
Binance’s efforts to dismiss the SEC’s lawsuit do not have a basis in the law, the federal regulator said in a filing on November 8, 2023.
The SEC pushed back against Binance’s motion to dismiss the suit, saying the motion relies on ‘distorted’ and ‘tortured’ interpretations of both federal law and precedents.
It will be interesting to watch how this battle unfolds and how the tone is to be set for future regulatory measures.
Looking forward
ollapses and rebuildingThe crypto industry is deep into a phase of introspection and reform, as it grapples with the aftermath of FTX. However, it’s important to remember that the challenges faced are not unique.
Every sector has experienced crises, and it is how the industry responds and adapts that matters most. Individuals must be well-informed about the crypto market, understanding its risks and rewards.
Investors must learn to perform a certain amount of due diligence
for example, If a company does not provide transparency, perhaps it’s wiser to take finances elsewhere.It is essential to strike a balance between supervisory oversight that safeguards against systemic risk without stunting innovation and growth.
Nobody knows where and when the next crisis will arise, but despite many lessons learned, there’s far to go and it’s only a matter of time before the next one.
The collapse of FTX highlighted the massive duplicity underlying many crypto exchanges, but its implosion should not be attributed to that alone.
It, like so many companies in the cryptocurrency industry, had propped itself up on an imaginary foundation of tokens it had invented, and that foundation was bound to fail eventually.
The FTX collapse serves as a stark reminder that the cryptocurrency industry is not without its challenges.
However, the lessons learned from this incident offer an opportunity for the industry to evolve, address vulnerabilities and pave the way for a more secure future.
The importance of audits, transparency, ethical practices, regulatory compliance and informed decision-making has been highlighted.
As the industry continues to evolve, these lessons will be instrumental in building a foundation of trust and stability for crypto and blockchain technologies.
The industry has been shaken to its foundations, but that’s no bad thing
t’s more than capable of building them properly.Valeriya Minaeva is the founder of VComms, a native Web 3.0 communications firm, and is also a main contributor to DeFi protocol 1inch Network.
Follow Us on Twitter Facebook Telegram
Check out the Latest Industry Announcements
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/Redshinestudio
-
Blockchain1 week ago
Robinhood Dealing With Fallout of Tokenized Equities Offering – Crypto News
-
Cryptocurrency1 week ago
Whale Sells $407K TRUMP, Loses $1.37M in Exit – Crypto News
-
Cryptocurrency1 week ago
Satoshi-Era Bitcoin Whale Moves Another $2.42 Billion, What’s Happening? – Crypto News
-
Blockchain7 days ago
Ripple and Ctrl Alt Team to Support Real Estate Tokenization – Crypto News
-
Technology7 days ago
Fed Rate Cut Odds Surge As Powell’s Future Hangs In The Balance – Crypto News
-
Cryptocurrency1 week ago
Cardano’s $1.22 target: Why traders should be aware of THIS ADA setup – Crypto News
-
Cryptocurrency1 week ago
Bitcoin Breaches $120K, Institutional FOMO Takes and House Debate Propel Gains – Crypto News
-
others7 days ago
EUR/USD recovers with trade talks and Fed independence in focus – Crypto News
-
Technology7 days ago
Fed Rate Cut Odds Surge As Powell’s Future Hangs In The Balance – Crypto News
-
Cryptocurrency1 week ago
Why Is Bitcoin Up Today? – Crypto News
-
Blockchain1 week ago
UK Banks Should not Issue Stablecoins – Crypto News
-
Cryptocurrency1 week ago
Donald Trump Jr. backs social media startup aiming to become a crypto powerhouse – Crypto News
-
Blockchain1 week ago
The Bitcoin Liquidity Supercycle Has Just Begun: Hedge Fund CEO – Crypto News
-
Cryptocurrency1 week ago
Strategy Resumes Bitcoin Buys, Boosting Holdings to Over $72 Billion in BTC – Crypto News
-
Business1 week ago
Pepe Coin Rich List June 2025: Who’s Holding Highest PEPE as it Nears Half a Million Holders? – Crypto News
-
Cryptocurrency1 week ago
It’s a Statement, Says Bitfinex Alpha – Crypto News
-
Cryptocurrency6 days ago
Bitcoin trades near $119K after new all-time high; Coinbase rebrands wallet to ‘Base App’ – Crypto News
-
Business6 days ago
XLM Is More Bullish Than ETH, SOL, And XRP, Peter Brandt Declares – Crypto News
-
Technology1 week ago
Google, Anthropic, OpenAI and xAI join US defence to tackle national security with AI – Crypto News
-
Cryptocurrency1 week ago
Stellar [XLM] bulls exhausted after rally – Is a pullback nearby? – Crypto News
-
Cryptocurrency1 week ago
Fed’s Hammack Raises Inflation Concerns Amid Push For Interest Rate Cut – Crypto News
-
Cryptocurrency1 week ago
1inch price forecast: 1INCH hits 7-month high after double digit gains – Crypto News
-
Cryptocurrency1 week ago
1inch price forecast: 1INCH hits 7-month high after double digit gains – Crypto News
-
others7 days ago
Top Crypto Exchange by Trading Volume Binance Announces Airdrop for New Ethereum (ETH) Ecosystem Altcoin – Crypto News
-
others7 days ago
VanEck Details Key Drivers Boosting Bitcoin Price, Including Corporate Treasury Demand, ETF Flows and More – Crypto News
-
Business6 days ago
XRP Lawsuit Update: Ripple Paid $125M in Cash, Settlement Hinges on Appeal – Crypto News
-
Cryptocurrency5 days ago
Anarchy, crime and stablecoins – Blockworks – Crypto News
-
Business1 week ago
CME XRP Futures Hit $1.6B In Total Trading Volume Since Launch – Crypto News
-
others1 week ago
Bitcoin Critic Vanguard Becomes Strategy’s (MSTR) Largest Shareholder – Crypto News
-
Technology1 week ago
V Guard INSIGHT-G BLDC fan review: Cool performer with a premium look – Crypto News
-
Technology1 week ago
XLM Price Forecast: Why Stellar Lumens May Crash After 80% Rally in Last 7 Days – Crypto News
-
Metaverse1 week ago
Why voice is emerging as India’s next frontier for AI interaction – Crypto News
-
Metaverse1 week ago
Nvidia’s Jensen Huang says AI ‘fundamental like electricity’, praises Chinese models as ‘catalyst for global progress’ – Crypto News
-
Business7 days ago
Ethereum Price Prediction- Bulls Target $3,700 As ETH Treasury Accumulation Soars – Crypto News
-
others6 days ago
GBP/USD rallies on US PPI dip and Trump’s potential Powell removal – Crypto News
-
others6 days ago
GBP/USD rallies on US PPI dip and Trump’s potential Powell removal – Crypto News
-
Cryptocurrency6 days ago
Russia’s $85 Billion Sberbank to Launch Crypto Custody Services – Crypto News
-
Technology4 days ago
“Decentralized Ponzi Scheme”- Gold Bug Peter Schiff Slams Landmark Crypto Bills – Crypto News
-
Cryptocurrency1 week ago
Top 3 altcoins under $1 worth watching: Sei, Ethena, Arbitrum – Crypto News
-
Blockchain1 week ago
Altcoins Chase New Highs After Bitcoin Hits $123,000 – Crypto News
-
De-fi1 week ago
Ripple’s RLUSD Market Cap Passes $515M, Flips TrueUSD – Crypto News
-
De-fi1 week ago
DeFi TVL Surges Past $126B, Up Over 45% Since April – Crypto News
-
Metaverse1 week ago
Broadcom challenges Nvidia’s AI dominance with ultra-connected Tomahawk networking chip launch – Crypto News
-
Cryptocurrency1 week ago
Hypercharged Exposure to XRP and Solana Now Available With These Two ETFs – Crypto News
-
Cryptocurrency1 week ago
Nothing Burger or Crypto Catalyst? – Crypto News
-
Business1 week ago
$800 Billion JPMorgan To Rival Tether, Circle, and Ripple In Stablecoin Race – Crypto News
-
Cryptocurrency1 week ago
300% Bitcoin (BTC) Skyrocketing, Ethereum (ETH) Below $3,000 Again, Was Shiba Inu (SHIB) Dump Controlled? – Crypto News
-
Blockchain1 week ago
BitMine Shares Rallied After Peter Thiel Investment. – Crypto News
-
others1 week ago
Crypto Exchange Hack: BigONE Users Lose A Massive $27 Million In Recent Exploit – Crypto News
-
Cryptocurrency1 week ago
Pi Network Activity Soars as Mystery Wallet Acquires Millions in PI Coins – Crypto News