Crypto collapse: the cult of personality and the normalisation of fraud in FTX and Celsius
| Date | 08 July 2024 |
| Pages | 288-303 |
| DOI | https://doi.org/10.1108/JFC-01-2024-0054 |
| Published date | 08 July 2024 |
| Author | Simon Mackenzie |
Crypto collapse: the cult of
personality and the normalisation
of fraud in FTX and Celsius
Simon Mackenzie
Faculty of Humanities and Social Sciences, School of Social and Cultural Studies,
Te Herenga Waka –Victoria University of Wellington, Wellington, New Zealand
Abstract
Purpose –This paper reviews the recent collapse of two cryptocurrency enterprises, FTX and Celsius.
These two cases of institutional bankruptcy have generated criminal charges and other civil complaints,
mainly alleging fraud against the CEOs of the companies.This paper aims to analyse the fraud leading to
these bankruptcies, drawing on key concepts from the research literature on economic crime to provide
explanationsfor what happened.
Design/methodology/approach –This paper uses a case study approachto the question of how large
financial institutionscan go off the rails. Two theoretical perspectives are applied to the cases of the FTX and
Celsiuscollapses. These are the “normalisation of deviance”theoryand the “cult of personality”.
Findings –In these two case studies,there is an interaction between the “normalisation of deviance”onthe
institutional level and the “cult of personality”at the level of individual leadership. The CEOs of the two
companies promoted themselves as eccentric but successful examples of the visionary tech finance genius.
This fostered the normalisationof deviance within their organisations. Employees, investors and regulators
allowed criminal and highly financiallyrisky practices to become normalised as they were caught up in the
attractivestory of the trailblazing entrepreneur making millionsin the new cryptoeconomy.
Originality/value –This paper makes a contributionboth to the case study literature on economic crime
and to the developmentof general theory in economic criminology.
Keywords Personality, Corruption, Fraud, Economic crime, Cryptocurrency,
Normalisation of deviance
Paper type Case study
Introduction
In this paper, we will consider two case studies of economic crime, in the form of recent
“crypto collapses”–the FTX exchangeand the “crypto bank”Celsius. We will review these
cases in light of two theoretical ideas, which we willpropose to be complementary in some
aspects. One of those theoretical perspectives is a core part of the established cannon in
sociological studies of white-collar crime: the “normalisation of deviance”thesis (Vaughan,
1996). The other theoretical orientation, which we refer to as “the cult of personality”,isa
© Simon Mackenzie. Published by Emerald Publishing Limited. This article is published under the
Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and
create derivative works of this article (for both commercial and non-commercial purposes), subject to
full attribution to the original publication and authors. The full terms of this licence may be seen at
http://creativecommons.org/licences/by/4.0/legalcode
This project has received funding from the European Research Council (ERC) under the European
Union’s Horizon 2020 research and innovation programme (grant agreement no. 804851).
JFC
32,2
288
Journalof Financial Crime
Vol.32 No. 2, 2025
pp. 288-303
EmeraldPublishing Limited
1359-0790
DOI 10.1108/JFC-01-2024-0054
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
consideration of how contemporarydevelopments in so-called celebrity culture might affect
our thinking about economiccrimes.
Both FTX and Celsius had inspirational and energising chief executive officers, who
propelled their respectiveorganisations to success and then onwards to disaster. The white-
collar crime literature has a lot to say about wayward leaderswho come undone because of
an overconfidence in their own abilities and a sense that they are above the law (Arnulf and
Gottschalk, 2013). The question we will explore here is whether this individual-level
perspective can be usefully integrated with the organisational deviance perspective that
Vaughan’s orientation involves. In other words, how do we reconcile a theoretical
perspective on how organisations go off the rails with the research literature on how
individuals go off the rails –in particular individuals at the highest levels of the
organisations in question.
Economic crime is defined as financiallymotivated crime that uses deception rather than
physical force to causea loss, and is commonly linked to the workings of “the economy”,i.e.
the production, distributionand consumption of goods (Button et al., 2022: 13-14). Economic
crime is a much bigger problem than traditional crime whether the yardstick is number of
victims, costs involved or number of offences (Button et al., 2022: 17). Fraud –the main
criminal charge in both case studiesreviewed here –is a key offence of interest foreconomic
criminology, and the perspective includes the study of criminogenic cultures in
organisations as well as individual motivesand opportunities. Economic criminology is an
interdisciplinary pursuit based in criminology but including ideas and scholars from many
other disciplinary areas (Button etal., 2022: 22). As such it provides a good platform for the
kind of analysis to be undertaken in this paper, since we intend to look at both
organisational and individual features of the financial crimes in question, and build an
interdisciplinary explanation that acknowledges a recursive structuring relationship
between the one and the other; that is, the effect of the individual on the organisational
culture and vice versa.
Using economic criminologyas the basis of the inquiry in the paper also helps mitigate to
some extent key limitations of the two theoretical perspectives used. For the “cult of
personality”approach, a major limitation is that there has been a relative dearth of robust
empirical research studies on the topic of personality in economic crime, and those studies
that have been done present somewhat contradictory and inconclusive findings (Button
et al.,2022:198;Collins and Schmidt, 1993;Blickleet al.,2006;Nee et al.,2019).In terms of the
“normalisation of deviance”approach, a key issue would be that like the differential
association theory on which it is based, it can risksuggesting quite a black and white view
of organisational culture, drawing attention towards what is normative and obscuring the
complexities of inter-organisational conflict. In both cases, situating these perspectives in
the wider disciplinary field of economic criminology can provide helpful balance and
context, so that what might otherwise seem isolated and not altogether unproblematic
concepts can instead be taken as interconnected strands in a larger web of explanation in
economic crime.
While traditional “street”crime rates have been subject to a long and sustained fall,
economic crime rates are rising and, consequently, being increasingly recognisedas a major
and growing threat even in the face of a complacent political discourse that would prefer to
deny it (Button et al., 2023). This makes the study of the etiology of economic crimes a
matter of paramount importance for contemporary criminology. Given the breadth of
offending behaviours that can fall within the ambit of economiccrime –a crime like fraud,
for example, can refer to myriad activities –looking to notable case studies of particular
examples of economiccrime seems to be a productive approach.
Crypto
collapse
289
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