On November 11, 2022, FTX — valued at $32 billion as recently as February of this year — filed for Chapter 11 bankruptcy. Within days, the full picture began to emerge: $8.9 billion in customer funds missing, $10 billion quietly transferred from customer accounts to sister trading firm Alameda Research, and a company that FTX’s newly appointed bankruptcy CEO John Ray III described as “a complete failure of corporate controls” — a man who had overseen the Enron bankruptcy and said he had never seen anything like it.
The warning signs were there. They always are.
Growth Metrics as a Blindfold
The most instructive aspect of the FTX story is not the fraud itself — it’s how long the governance reality remained invisible behind the growth narrative.
FTX reported astronomical growth through 2021 and into 2022. Revenue was impressive. Valuations soared. The company attracted investment from some of the most respected names in venture capital — firms that conduct rigorous due diligence on conventional investments. Yet the absence of a CFO, the lack of any independent board, the commingling of customer funds with proprietary trading operations — none of these surfaced in the public narrative until the collapse was already underway.
Growth metrics measure outcomes. They say almost nothing about the structural integrity of the organization generating them. A company can post exceptional top-line numbers while operating with no accounting function, no risk management framework, and no meaningful oversight — as FTX demonstrated at extraordinary scale.
The Founder Worship Problem
The second governance failure running through the FTX story is one that extends well beyond crypto: founder worship systematically erodes oversight.
Sam Bankman-Fried cultivated a carefully constructed persona — the altruistic billionaire, the effective altruist, the eccentric genius sleeping on a beanbag in the office. That narrative attracted not just capital but credibility. Investors extended latitude they would never extend to a conventional management team. Partners accepted representations without verification. The person became the proxy for the business.
As University of Arkansas governance researchers noted after the collapse, Bankman-Fried’s “relentless pursuit of growth and disregard for basic tenets of corporate governance” set a cultural tone that permeated the entire organization. When the founder’s judgment goes unchallenged at the top, the entire organization learns that challenging judgment is not how things work here. That cultural reality is as much a governance failure as the missing board meetings.
What the Venture Capital Community Needs to Reckon With
The FTX collapse is not just a story about one founder’s fraud. It is also a story about what the investment community chose not to scrutinize during a period of peak capital availability.
Governance quality was systematically underweighted in the bull market investment thesis of 2021-2022. Growth metrics dominated diligence conversations. Speed of deployment mattered more than depth of evaluation. The implicit assumption — that governance problems could be fixed later, after the growth was captured — proved catastrophically wrong in FTX’s case, and likely in others yet to fully surface.
The recalibration now underway in how venture capital evaluates governance, controls, and founder accountability is overdue. The FTX story will be cited in investment committee discussions for years — not as an anomaly, but as a reference case for what governance-blind investing at scale can produce.
What Founders Should Take From This
For founders building companies, the FTX collapse is a useful — if brutal — illustration of why governance built early is an asset, not a constraint.
The structural foundations that FTX never built — independent oversight, clean separation of interests, transparent financial controls, genuine accountability mechanisms — are not bureaucratic overhead. They are what makes a company resilient enough to survive its own mistakes, credible enough to attract lasting institutional trust, and safe enough to steward the assets customers and investors place in it.
The question worth sitting with is not “how much governance does a company our size need?” but “what would it take for our governance structure to fail the people who trust us?” — and building accordingly.
The FTX story will take years to fully unwind. But the governance lessons are available right now. What patterns from this collapse feel most relevant to the organizations and ecosystems you’re part of? Let’s keep learning — together.
harish.balasubramanian 
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