Regulatory Risk in Crypto Asset Management: Governance and Executive Accountability Post-FTX

The collapse of FTX in late 2022 exposed systemic vulnerabilities in crypto asset management, particularly in corporate governance and executive accountability. As regulators and market participants grapple with the aftermath, the industry has entered a new era of scrutiny, where compliance and transparency are no longer optional but existential imperatives. This article examines how post-FTX regulatory developments, governance reforms, and investor sentiment shifts are reshaping the risk landscape for crypto asset managers.

The FTX Aftermath: A Catalyst for Regulatory Overhaul

The FTX collapse was not merely a financial disaster but a governance catastrophe. John J. Ray III, the liquidator appointed to oversee FTX's dissolution, described the firm's failure as a "complete failure of corporate controls, including a lack of internal controls, weak risk management, and no oversight" according to the report. Poor governance practices-such as commingling funds, inadequate auditing, and unchecked executive spending-eroded trust and triggered a chain reaction of market instability.

Regulators responded swiftly. The U.S. Securities and Exchange Commission (SEC) intensified its enforcement actions, classifying many cryptocurrencies as securities and targeting unlicensed exchanges. Meanwhile, the Department of Justice (DOJ) established the National Cryptocurrency Enforcement Team (NCET) in 2023, leading to high-profile cases like the $4 billion settlement with Binance and the imprisonment of its former CEO for anti-money laundering (AML) failures. These actions signaled a paradigm shift: crypto governance would no longer operate in a regulatory gray zone.

Post-FTX Regulatory Frameworks: From Fragmentation to Clarity

Between 2023 and 2025, governments moved beyond reactive enforcement to establish comprehensive frameworks. In the U.S., the GENIUS Act (July 2025) created the first federal stablecoin regime, mandating reserve requirements and consumer protections for payment stablecoins. This law addressed a critical gap left by the absence of a unified federal framework, which had previously allowed regulatory arbitrage across states.

The CLARITY Act, passed by the House in July 2025, aimed to reduce regulatory ambiguity by introducing a formal test based on decentralization and functional use. Complementing these efforts, the Senate Agriculture Committee proposed granting the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over spot digital commodity markets, further centralizing oversight according to the report.

Globally, the European Union's Markets in Crypto-Assets (MiCA) regime, which took effect in 2025, streamlined cross-border operations for crypto firms across 27 member states. Hong Kong and the UAE also introduced reserve requirements, capital standards, and licensing processes, reflecting a coordinated global push for accountability.

Governance Reforms: Lessons from the Frontlines

The FTX collapse prompted industry-wide introspection. Firms like Binance, once criticized for lax compliance, overhauled their operations to meet stricter AML and know-your-customer (KYC) standards. However, these reforms were not voluntary; they were driven by regulatory pressure and investor demands for transparency.

A critical lesson from FTX is the necessity of centralized financial controls. The firm's decentralized structure-where executives had unchecked access to funds-enabled the misuse of customer assets. Post-FTX, crypto firms are adopting governance models that emphasize:
1. Segregation of duties: Ensuring no single individual controls critical financial decisions.
2. Third-party audits: Regular, independent assessments of reserves and operations.
3. Board accountability: Strengthening oversight committees to monitor executive actions.

These measures are not merely defensive; they are strategic. As one industry analyst noted, "Investors now demand proof of governance" before committing capital. The days of "trust us" are over.

Investor Confidence: A Fragile Recovery

The FTX collapse eroded trust in the crypto sector. Surveys indicated that 40% of consumers associated crypto with criminality and fraud, while one in five became more cynical about the industry according to the report. The contagion effect was evident in markets like Turkey, where investors liquidated stocks to meet margin calls after FTX's collapse according to the same report.

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illustrates the shifting attitudes toward crypto as a legitimate investment class.

Yet, the industry has shown resilience. By 2023, the total crypto market capitalization surged 108.1%, driven largely by Bitcoin's 155.2% growth according to market analysis. This recovery was fueled by optimism around regulatory clarity and the potential approval of spot Bitcoin ETFs. However, investor confidence remains fragile. In 2025, Bitcoin realized losses hit levels last seen during the FTX collapse, underscoring ongoing volatility according to crypto analytics.

The Road Ahead: Balancing Innovation and Accountability

The post-FTX era presents a paradox: regulators must foster innovation while mitigating risks. The U.S. government's executive order establishing a Strategic Bitcoin Reserve in 2025 exemplifies this balance, formalizing Bitcoin's role in national financial policy while prohibiting a retail central bank digital currency (CBDC) according to policy analysis. Such policies aim to integrate crypto into traditional systems without compromising stability.

For crypto asset managers, the path forward requires navigating a complex web of regulations. The GENIUS Act, MiCA, and other frameworks will demand significant compliance investments. However, these challenges also create opportunities for firms that prioritize governance and transparency. As the SEC's Chairman noted in 2025, "Tokens that derive value from use" will thrive in this new environment.

A would help visualize the price and momentum of the leading cryptocurrency in the post-FTX recovery.

Conclusion

The FTX collapse was a watershed moment for crypto asset management. It exposed governance failures that regulators and market participants are now addressing through stricter frameworks, enhanced accountability, and investor education. While regulatory risks remain elevated, the industry's evolution toward transparency and compliance offers a blueprint for sustainable growth. For investors, the key takeaway is clear: in crypto, as in traditional finance, governance is not just a compliance checkbox-it is the foundation of trust.