FTX: A Case Study in Institutional Blind Spots and Collective Overconfidence

Abstract

The collapse of FTX represents a profound failure of institutional judgment rather than an isolated technological or market anomaly. This article analyzes the FTX collapse through the lens of practical intelligence, focusing on governance failure, moral licensing, social proof, regulatory arbitrage, and narrative capture. By examining why visible risks remained unchallenged despite widespread expert involvement, the case illustrates how intelligence,
reputation, and ethical signaling can coexist with extreme fragility. The lessons drawn extend beyond cryptocurrency and apply broadly to decision-making in complex, high-confidence environments.