BÀI MK LÀM

3. Case Study: Behavioral Analysis of the FTX Collapse

3.1. Overview of the FTX Event
3.1.1. FTX: Formation and Key Milestones Before Collapse
FTX was founded in May 2019 by Sam Bankman-Fried, a former quantitative trader at Jane Street
Capital, along with Gary Wang. Initially envisioned as a platform to serve institutional investors and
serious retail traders, FTX quickly gained popularity due to its innovative features such as tokenized
stocks, leveraged tokens, and advanced derivatives trading. The exchange distinguished itself with its
user-friendly interface, robust trading engine, and highly liquid order books.
By mid-2021, FTX had become one of the largest cryptocurrency exchanges globally, with billions in
daily trading volume. It raised $900 million in Series B funding at a valuation of $18 billion, attracting
major investors such as Sequoia Capital and SoftBank. In an ambitious marketing push, FTX secured
naming rights to the Miami Heat arena (renamed FTX Arena) and partnered with sports figures like
Tom Brady and organizations like Major League Baseball. Sam Bankman-Fried was often referred to in
the media as a "crypto wunderkind" and one of the most influential figures in the digital asset industry.
FTX's rapid ascent made it a symbol of the explosive growth of the crypto sector. However, behind the
scenes, the company's financial practices and ties to its sister hedge fund Alameda Research were
opaque—issues that would later contribute to its dramatic downfall in 2022.
3.1.2. The breakdown of FTX
The collapse of FTX in November 2022 marked one of the most significant and rapid failures in the
history of the global cryptocurrency market. Founded by Sam Bankman-Fried (SBF) in 2019, FTX
quickly rose to prominence as a leading crypto exchange platform, attracting millions of users and
securing high-profile endorsements from celebrities and institutional investors. The firm was lauded for
its innovative trading products and user-friendly interface, and it cultivated an image of transparency
and trustworthiness within the volatile digital asset sector. However, behind this façade, serious
governance flaws and ethical lapses were developing. Investigations revealed that FTX had secretly
transferred billions of dollars in customer funds to its sister hedge fund, Alameda Research, to cover
trading losses and risky bets. The exposure of these practices triggered a crisis of confidence, mass
withdrawals, and ultimately, the bankruptcy of FTX, resulting in estimated losses of over USD 8 billion
and a profound loss of trust in the broader crypto ecosystem.
3.2. Analysis of Causes and Behavioral Factors
3.2.1 Investor Behavior
Investor psychology played a central role in the growth and eventual collapse of FTX. Retail and
institutional investors alike displayed a range of cognitive biases that distorted their decision-making
processes. Herding behavior was especially pronounced, as many followed the investment trends set by
prominent figures and financial institutions, rather than conducting independent evaluations of FTX’s
financial health. This behavior was further reinforced by the perceived credibility lent by endorsements
from celebrities and venture capital firms.
Overconfidence was another dominant trait, particularly among retail investors who believed they had
superior knowledge or timing abilities in the volatile crypto space. Many assumed that FTX’s rising
valuation and media image signaled long-term success, ignoring red flags in the company’s governance
and financial disclosures. As the crisis unfolded, loss aversion—the tendency to fear losses more than
seek equivalent gains—took over. Instead of promptly withdrawing funds, investors clung to their
positions, hoping the situation would stabilize. This delay contributed to the platform’s inability to meet
withdrawal demands once trust eroded, accelerating the collapse.
3.2.2 Executive Behavior
The actions of FTX’s leadership, most notably Sam Bankman-Fried, revealed deep behavioral failures
rooted in cognitive distortions and flawed moral reasoning. Overconfidence dominated the executive
decision-making process. Bankman-Fried assumed he could control both FTX and Alameda Research
without compromising the integrity of either entity. He believed that internal risk could be mitigated
simply through his judgment, an example of the illusion of control—overestimating one’s ability to
manage complex, uncertain systems.
Moreover, the use of FTX’s own token (FTT) as collateral indicated a disregard for objective market
dynamics. This decision reflected a kind of self-confirming bias, wherein executives internalized the
inflated value of their own asset as legitimate without acknowledging its vulnerability to sentiment
shifts. Compounding these issues was a self-serving bias evident in Bankman-Fried’s public alignment
with “effective altruism.” By casting himself as a philanthropist working toward long-term global good,
he may have rationalized ethically questionable behaviors as justified by their perceived ultimate
benefits.
3.2.3 Institutional and Regulatory Behavior
Institutional investors and regulatory authorities also exhibited behavior that facilitated the rise and
eventual collapse of FTX. Many venture capital firms neglected due diligence, acting under the
influence of groupthink. The excitement surrounding the crypto industry created a positive feedback
loop, where funders validated each other’s investment decisions without applying adequate skepticism.
Anchoring bias was also present, as past successes in the fintech space led investors to assume that FTX
would follow a similar path, despite lacking transparency.
Regulators, particularly in jurisdictions like the Bahamas, showed signs of status quo bias and ambiguity
aversion. Faced with a rapidly evolving and poorly defined market, regulators hesitated to intervene or
scrutinize FTX’s operations closely. The novelty of crypto markets created a sense of uncertainty that
deterred enforcement, leaving a significant oversight vacuum. This inaction enabled FTX’s risky
practices to go unchecked, ultimately increasing the systemic risk posed by the firm’s collapse.
3.2.4 Media and Public Perception
The media played a dual role in shaping and distorting public perception of FTX. Early in the firm’s
rise, press coverage was overwhelmingly positive, portraying Bankman-Fried as a genius entrepreneur
and ethical innovator. This contributed to the halo effect, where admiration in one domain (e.g.,
philanthropy) unjustifiably boosted perceived competence in another (e.g., corporate governance). These
narratives reinforced investor overconfidence and suppressed skepticism.
However, once signs of collapse emerged, media framing rapidly shifted. Dramatic headlines, emotional
testimonials from affected users, and retrospective analyses dominated coverage. This led to recency
bias and availability heuristics taking hold in public discourse. People became disproportionately
influenced by recent, vivid stories, while earlier concerns or warnings were forgotten. The sharp turn in
narrative reflected the volatility of public sentiment when shaped by psychological shortcuts and media
framing.
3.3. Impacts and Consequences
3.3.1 Impact on the Cryptocurrency Market
The collapse of FTX sent shockwaves through the global cryptocurrency market. As one of the largest
and most influential exchanges, FTX’s downfall resulted in a sharp decline in the value of major
cryptocurrencies, including Bitcoin and Ethereum. The loss of confidence triggered a liquidity crunch
across the sector, as investors rushed to withdraw funds from other platforms perceived to be at risk.
This event intensified the ongoing “crypto winter,” with numerous smaller firms and projects facing
insolvency or drastically reduced investment.
Furthermore, the market became more risk-averse in the wake of the collapse. Venture capital
investments into Web3 and blockchain-related startups slowed considerably, and many retail investors
began to exit the space. The perception of crypto as a high-return but unregulated and opaque asset class
deepened, amplifying volatility and skepticism about its long-term viability.
3.3.2 Erosion of Investor Confidence
The feeling of being deceived by people inside FTX, especially its top executives, caused a sharp loss of
confidence in centralized crypto exchanges. As panic spread, many users and institutional investors
rushed to withdraw their funds from FTX wallets. Notably, Nexo withdrew over $400 million worth of
crypto, while EIP pulled out more than $250 million. This mass exodus reflected growing fears about
the safety of crypto assets held on centralized platforms. As a result, attention shifted toward self-
custody wallets and decentralized finance (DeFi) as potentially safer alternatives. However, the damage
to the crypto industry’s reputation was already done, with many in the public now viewing the entire
sector as synonymous with fraud and reckless speculation.
The feeling of being deceived by people inside FTX, like its executives, made investors and the public
lose trust in centralized crypto exchanges. As a result, many started to question how safe these platforms
really are. This led to growing interest in self-managed wallets and decentralized finance (DeFi) as safer
options. However, by that time, the crypto industry’s reputation had already taken a big hit, with many
people beginning to associate cryptocurrencies with scams and risky speculation.
3.3.3 Regulatory and Legal Repercussions
The regulatory landscape also shifted significantly after FTX’s implosion. Policymakers across the
United States, European Union, and Asia accelerated efforts to design clearer and stricter legal
frameworks for digital assets. The incident was frequently cited in congressional hearings and debates as
evidence of the urgent need for investor protection and exchange oversight.
In the United States, proposed legislation such as the Digital Commodity Consumer Protection Act
(DCCPA) gained renewed traction, while agencies like the SEC and CFTC increased their enforcement
actions. FTX’s collapse also prompted discussions about exchange registration, fund segregation, and
auditing requirements. Internationally, it catalyzed coordination among regulators to address cross-
border risks posed by crypto platforms operating outside traditional jurisdictions.
In sum, the fall of FTX produced cascading effects that extended far beyond a single firm’s failure. It
destabilized the broader crypto ecosystem, undermined investor trust, and forced regulatory systems to
evolve more rapidly than anticipated. These impacts reflect how the behavioral decisions of a few, when
amplified through institutional failures and market structures, can yield consequences of systemic scale.
The FTX case thus stands not only as a financial debacle but also as a pivotal moment in the maturation
and reform of the global crypto industry.
3.4. Lessons Learned
The FTX case offers a number of crucial lessons for the future governance and regulation of financial
markets, especially within emerging sectors like cryptocurrencies. First, the dangers of executive
overconfidence and moral hazard underscore the irreplaceable need for robust internal controls,
transparent reporting, and independent board oversight. Firms, particularly those managing customer
assets, must establish strict separations between entities and implement rigorous risk management
protocols. Second, investor education and skepticism are vital. Herding behavior and overreliance on
reputational signals rather than substantive due diligence can lead to massive collective losses. Third,
the event highlights the urgent necessity of comprehensive and globally coordinated regulatory
frameworks for digital assets. Without effective regulation, innovative markets can become breeding
grounds for systemic risks. Lastly, the FTX collapse serves as a stark reminder that technological
innovation does not eliminate human psychological biases. Financial stability ultimately depends on the
integrity, competence, and vigilance of all market participants.
4. Linkage to Vietnam: The Van Thinh Phat Scandal (2022)
4.1. Overview of the Van Thinh Phat Event
4.1.1. Van Thinh Phat: History and Key Highlights
Van Thinh Phat Group, established in 1992 by businesswoman Truong My Lan in Ho Chi Minh City,
began as a company focused on trade and hospitality. Over the years, the group transitioned into real
estate development and grew into one of Vietnam’s most powerful private conglomerates. It owns and
operates several high-profile real estate projects in central Ho Chi Minh City, including Times Square,
Union Square, Saigon Peninsula, and The Garden Mall (formerly Thuận Kiều Plaza). Beyond property,
the group’s vast ecosystem includes hundreds of subsidiaries and affiliates engaged in finance,
hospitality, and infrastructure. Under the strategic leadership of its founder, Vạn Thịnh Phát quickly
expanded its influence in both the business and real estate sectors. Its rapid and secretive growth,
however, also drew public attention and scrutiny in later years.
4.1.2. The collaspe of Van Thinh Phat
In October 2022, Vietnam's financial markets were rocked by the arrest of Truong My Lan,
Chairwoman of Van Thinh Phat Group, on allegations of large-scale financial fraud. Lan and her
associates were accused of orchestrating illicit activities involving Saigon Commercial Bank (SCB),
including the embezzlement and misappropriation of funds amounting to billions of USD over several
years. The scandal exposed systemic weaknesses in corporate governance and risk management
practices within Vietnam’s banking sector, resulting in widespread investor panic, bank runs at SCB,
and broader concerns about the stability of the national financial system.
4.2. Behavioral Analysis
4.2.1. Behavioral analysis and similarities to FTX
Much like the FTX case, the Van Thinh Phat scandal demonstrated profound behavioral failures,
including executive overconfidence, moral hazard, and ethical misconduct. Truong My Lan and her
network leveraged personal influence and opaque ownership structures to manipulate internal banking
operations for personal gain. Regulatory oversight proved insufficient to detect and prevent these abuses
in a timely manner, partially due to information asymmetry and regulatory capture. Investor herding
behavior was also evident as depositors, upon hearing rumors of SCB’s instability, rapidly withdrew
funds, leading to a self-fulfilling liquidity crisis. Both cases illustrate how unchecked power, combined
with poor transparency and weak institutional safeguards, can generate catastrophic financial collapses.
4.2.2. The impact of Van Thinh Phat to Vietnam’s stock maket.
The Van Thinh Phat scandal had a significant impact on Vietnam's financial and stock markets,
particularly in terms of investor confidence and market liquidity. In October 2022, the arrest of Truong
My Lan, chairwoman of the conglomerate, on charges of financial fraud and bond-related violations
triggered widespread panic. As Vạn Thịnh Phát was closely associated with a series of corporate bond
issuances, the event led to a sharp loss of confidence in the corporate bond market. Many retail and
institutional investors rushed to withdraw or liquidate assets related to real estate and finance, fearing
contagion. As a result, the VN-Index experienced sharp declines, especially among real estate stocks
and banking sectors exposed to corporate bond risk. Liquidity in the bond and credit markets tightened,
prompting government agencies to intervene with policy measures to stabilize investor sentiment and
restructure the corporate bond market. In the long term, the scandal highlighted the lack of transparency
and regulation in private placements and raised calls for stronger legal frameworks to govern corporate
bonds and real estate financing.
4.3. Lessons for Vietnam’s Financial System
The Van Thinh Phat case underscores the critical need for stronger corporate governance, enhanced
financial transparency, and more proactive regulatory frameworks in Vietnam. Financial institutions
must enforce stricter internal controls and separate ownership from management to minimize conflicts
of interest. Furthermore, the government must invest in strengthening investor education and market
discipline to counteract panic-driven behaviors. Learning from both FTX and Van Thinh Phat, Vietnam
has an opportunity to build a more resilient and trustworthy financial system that can better withstand
future shocks.
5. Conclusion
The collapse of FTX and the Van Thinh Phat scandal serve as stark reminders that financial innovation
and economic development, while essential for progress, cannot substitute for strong governance, ethical
leadership, and effective regulatory oversight. Behavioral failures, particularly overconfidence, moral
hazard, and herding behavior, played a central role in both crises, demonstrating the persistent
vulnerabilities of human psychology in financial decision-making.
These case studies highlight the urgent need for more robust risk management systems, stricter
transparency requirements, and more comprehensive regulatory frameworks to safeguard against future
systemic shocks. Furthermore, they underline the importance of fostering a culture of ethical
responsibility among corporate leaders and encouraging critical thinking and due diligence among
investors.
As the financial landscape continues to evolve, both globally and in emerging markets like Vietnam, the
lessons from FTX and Van Thinh Phat must be carefully heeded. Only through proactive reform and
collective vigilance can financial systems hope to build greater resilience, restore public trust, and
support sustainable long-term growth.
MAKE-UP CỦA MK
3. Common Behaviors of Vietnamese Individual Investors During Volatility Events
3.1. Herding Behavior
During periods of market volatility, especially during the 2008 global financial crisis and the COVID-19
pandemic, Vietnamese individual investors tend to exhibit strong herding behavior. Research by Chi and
Quỳnh (2024) indicates that during times of crisis, individual investors often panic and sell off their
stocks in mass without conducting proper analysis, leading to significant declines in the VN-Index.
Specifically, in November 2008, the VN-Index dropped from 500 points to 288 points, reflecting the
panic and loss of confidence among investors.
Time VN-Index (Points) Change (%)
November 2008 288 -42.4%
March 2020 645 -35.5%
3.2. Overreaction to Market News
Vietnamese individual investors often overreact to market news, causing irrational buying or selling
decisions. During the COVID-19 pandemic, when the number of infections surged, many investors
hastily sold off their stocks, resulting in a sharp decline in the market. However, when signs of recovery
emerged, they rushed to buy, causing another surge in stock prices.
Time VN-Index (Points) Key event
March 2020 645 Sharp rise in infection rates
May 2020 900 Market recovery after pandemic control
3.3. Fear and Greed
The emotional factors of fear and greed play a crucial role in shaping the decision-making process of
Vietnamese individual investors, particularly during volatile market conditions. During market
downturns, fear of further losses drives many investors to hastily sell their holdings, often at a loss. On
the other hand, during market upturns, greed takes over, pushing investors to buy stocks without fully
assessing their fundamental value. This fear-driven and greed-driven behavior often leads to asset
mispricing and excessive market fluctuations.
4. Case Study: The COVID-19 Pandemic and its Impact on Vietnamese Investors
4.1. Market Response to the Pandemic
The COVID-19 pandemic created a unique volatility event that tested the behavior of Vietnamese
individual investors. In the early days of the pandemic, the stock market experienced significant losses
as global and local uncertainties mounted. Vietnamese retail investors, driven by fear, quickly liquidated
their portfolios, contributing to the market crash. However, as the pandemic continued and effective
control measures were implemented, the market began to recover.
Table 3: Main events in Vietnam’s stock market after COVID Panemic
Time VN-Index (Points) Key event
January 2020 1000 Stable market
March 2020 645 Pandemic outbreak
May 2020 900 Recovery after pandemic control

(Source: Phan et al., 2023)

4.2 Investor Behavior During the Pandemic
During the pandemic, Vietnamese individual investors exhibited behavior marked by panic selling as the
market declined and a rush to buy when the market began to recover. This pattern reflects a lack of
patience and a short-term investment mentality. Phan et al. (2023) argue that the absence of sufficient
information and financial knowledge made investors more vulnerable to emotional impulses, resulting
in irrational decisions during a period of uncertainty.
4.3 Sectoral Impact
Different sectors were impacted differently during the pandemic. The financial sector was hit hardest
due to concerns over liquidity and non-performing loans. Meanwhile, sectors like technology and
pharmaceuticals saw significant growth, reflecting a shift in investment behavior among individual
investors.
Table 4: Key changes in various fields after COVID 19
Sector Impact during the pandemic
Financial Significant decline
Technology Strong growth
Pharmaceuticals Strong growth
(Source: Phan et al., 2023)
5. Conclusion and Policy Implications
5.1 Summary of Investor Behavior and Implications
The behavior of Vietnamese individual investors during market volatility is largely influenced by
emotional and psychological factors, leading to patterns such as herding behavior, overreaction to news,
and the emotional extremes of fear and greed. These behaviors have been observed during major
volatility events, such as the 2008 global financial crisis and the COVID-19 pandemic. During these
times, investors have been quick to panic-sell when the market falls and rush back in when recovery
signs appear, often without considering the fundamental value of assets. This emotional decision-
making, driven by short-term fears or hopes of profits, exacerbates market volatility and causes
inefficiencies.
In the context of Vietnam, where many retail investors may have limited experience or information,
these behaviors contribute to speculative bubbles and sudden price swings. Thus, it is crucial to
understand the role of investor psychology in shaping market dynamics and to address the underlying
factors that drive irrational decision-making.
5.2 Policy Recommendations for Mitigating Negative Behaviors
To reduce the negative impact of emotional behaviors and enhance the stability of the Vietnamese stock
market, several policy actions are necessary:
Investor Education and Financial Literacy: Educating retail investors about market cycles, emotional
control, and long-term investment strategies is essential. Financial literacy programs should emphasize
understanding the fundamentals of companies and market trends, as well as the psychological biases that
influence investment decisions. Programs that teach investors how to evaluate stocks based on financial
metrics rather than emotions can help mitigate the effects of panic selling and speculative buying.
Encouraging Long-Term Investment: Vietnamese investors often focus on short-term gains, driven by
fear and greed. Policies promoting long-term investment strategies, such as tax incentives for holding
investments for over a year, could help shift the focus away from speculation. Encouraging investment
in mutual funds or exchange-traded funds (ETFs), which provide diversification and lower individual
risk, can also promote more stable market behavior.
Market Regulation and Transparency: Strengthening market regulation and transparency is crucial for
preventing market manipulation and protecting investors. Enhanced regulations on disclosure
requirements and timely financial reporting can help investors make more informed decisions.
Additionally, circuit breakers or temporary trading halts could prevent panic selling during extreme
volatility, allowing time for the market to absorb new information.
Behavioral Insights in Regulation: Integrating behavioral finance insights into market regulation could
help address the psychological drivers behind irrational investor behavior. For instance, implementing
nudges that encourage investors to think long-term, or alert systems during extreme volatility, could
guide investors toward more rational decision-making. Policies could also focus on investor protection
funds that safeguard retail investors in times of market turmoil.
BÀI CỦA HẢI
1. Economic Context Before the Crisis
Van Thinh Phat Group had long been known as a major real estate developer in Vietnam, with a
portfolio of valuable properties in Ho Chi Minh City and a reputation for operating discreetly. Despite
its low media profile, the group held significant influence and had close relationships with various
financial institutions.
Between 2020 and 2022, Vietnam’s capital markets experienced rapid growth, particularly in corporate
bond issuance. This development was driven by looser regulations, low interest rates, and a push to
diversify financing beyond traditional bank loans. Many businesses, especially in the real estate sector,
turned to bonds to raise capital quickly and at scale.
Van Thinh Phat and its network of affiliated companies took advantage of this opportunity, issuing large
volumes of bonds with attractive interest rates. These bonds were often distributed through SCB
branches and were marketed in ways that gave retail investors the impression that they were safe and
guaranteed. However, behind the scenes, the companies involved had weak financial positions, limited
transparency, and questionable use of proceeds.
The lack of an effective bond rating system, limited investor education, and minimal oversight created
an environment ripe for abuse, enabling Van Thinh Phat to carry out large-scale bond sales with little
scrutiny.

2. Behavior of Related Parties

a. Corporate Executives – Van Thinh Phat Group and Truong My Lan
The central figure in the scandal, Truong My Lan, exercised absolute control over Van Thinh Phat and
orchestrated a vast scheme involving over 900 affiliated companies. These entities were used to issue
bonds backed by vague or artificially inflated collateral. The money raised was often used to repay
previous debts or fund unrelated business activities, creating a chain of obligations that lacked
sustainable cash flow.
The company operated with little transparency. Financial statements were either not published or were
unreliable. Decisions were made behind closed doors, and there was no evidence of independent
governance or oversight mechanisms. The structure of the group allowed risks to be hidden and gave the
illusion of financial strength where none existed.
b. Financial Intermediaries – SCB and Related Firms
SCB played a critical role in distributing the bonds issued by Van Thinh Phat and its affiliates. Many
customers were introduced to the bonds by SCB employees, who marketed them as low-risk
investments. In some cases, clients believed they were purchasing bank deposit products, not high-yield,
unsecured corporate bonds.
The bank’s internal controls and compliance mechanisms failed to flag the risks. It appears that certain
employees were incentivized to promote these products aggressively. Brokerage firms associated with
the group also engaged in misleading marketing and provided investors with incomplete or deceptive
information.
This behavior represents a clear breakdown in fiduciary duty, as the institutions responsible for
protecting clients’ interests instead prioritized commissions and internal targets.
c. Retail Investors
Thousands of individual investors, many of them middle-class families and retirees, purchased these
bonds based on trust in SCB and the prestige of Van Thinh Phat. They were attracted by interest rates
far higher than those of bank savings, and they believed the bonds were safe due to their distribution
through a reputable bank.
In reality, many investors did not fully understand the nature of the products they were buying. They
failed to assess the creditworthiness of the issuers or the underlying collateral. This lack of financial
literacy and due diligence left them highly vulnerable when the scandal unfolded.
d. Regulators and Authorities
At the time of the bond issuances, Vietnam’s regulatory framework for corporate bonds was relatively
permissive. Private placements were widely used to bypass public disclosure requirements, and there
was no centralized monitoring system for bond issuance or trading.
Although some reforms were introduced in 2021, enforcement remained weak. Regulators failed to
detect early warning signs or to take proactive steps to prevent the spread of systemic risk. Only after
the arrest of Truong My Lan did authorities intervene decisively, placing SCB under supervision and
initiating a broad investigation into the corporate bond market.
Analysis

The Van Thinh Phat case provides a compelling example of how behavioral biases and flawed incentive
structures can lead to large-scale financial misconduct. Several cognitive errors contributed to the crisis,
both at the individual and institutional levels.
1. Overconfidence and Illusion of Control
Truong My Lan and her leadership team appeared to believe that they could control the outcome of their
risky financial strategies indefinitely. This overconfidence led them to continuously issue new bonds,
use complex company structures to obscure liabilities, and dismiss the need for transparency.
They also exhibited the illusion of control-overestimating their ability to manage markets, investor
sentiment, and regulatory attention. This psychological bias contributed to reckless decision-making and
the persistence of unsustainable practices.
2. Moral Hazard and Conflicts of Interest
The distribution of corporate bonds through SCB created a severe conflict of interest. Employees were
incentivized to sell products that they did not fully explain or understand, and management failed to
implement effective controls.
Because the financial intermediaries bore no legal responsibility for bond defaults, they had little
motivation to ensure product quality. This created a classic case of moral hazard, where the interests of
the sales agents were misaligned with those of the investors.
3. Herd Behavior and Information Asymmetry
Investors were influenced by the behavior of others and by their trust in the financial institutions
involved. Many assumed that if a bank was promoting a financial product, it must be safe. They were
also reassured by the belief that others were making the same investments, which reinforced their
decisions.
This type of herding behavior is common in environments with limited access to independent
information. Because retail investors did not have the tools or knowledge to evaluate risk, they relied on
superficial cues and followed the crowd.
4. Framing Effects and Misleading Communication
The way bonds were presented to customers played a crucial role in shaping perceptions. SCB staff
often framed the products as safe and stable, downplaying or omitting the fact that they were unsure of
high-risk corporate bonds. This framing effect caused many investors to misjudge the risk–reward
tradeoff.
Additionally, the use of terms like “guaranteed” or “trusted partner” created a sense of security that was
not based on reality. These communication tactics exploited psychological shortcuts and contributed to
poor financial decisions.
5. Regulatory Delay and Reactive Enforcement
Regulators were late to act despite early signs of irregularities. Their approach was largely reactive,
intervening only after significant public outcry and reputational damage had occurred.
A lack of real-time monitoring systems, combined with outdated reporting mechanisms, allowed the
scheme to grow in scale and complexity. Once the damage was done, restoring investor confidence
required extraordinary government intervention.
Conclusion

The Van Thinh Phat corporate scandal highlights the dangers of unchecked corporate power, weak
oversight, and behavioral blind spots across the financial ecosystem. It demonstrates that systemic risk is
not only a product of economic conditions, but also of human psychology and institutional failure.
Several lessons can be drawn from this case:
 1. Transparency and Accountability Must Be Strengthened:
Companies must be required to publish accurate, audited financial statements. Complex
ownership structures and off-balance-sheet financing should be scrutinized.
2. Financial Intermediaries Must Act Responsibly:
Banks and brokers have a duty to explain financial products clearly and ensure that clients
understand the associated risks. Sales incentives must not undermine ethical conduct.
3. Investor Education is Crucial:
Retail investors need access to reliable information and basic financial literacy to avoid being
misled. Regulatory bodies should invest in public education and create independent information
portals.
4. Behavioral Biases Must Be Accounted For:
Overconfidence, herding, and framing effects can distort decision-making at every level.
Institutions should design systems that check these biases-through independent oversight,
mandatory disclosures, and whistleblower protections.
5. Regulation Must Be Proactive, Not Reactive:
Governments and financial regulators must anticipate risks and adapt their frameworks to
changing financial practices. Real-time data, integrated surveillance systems, and early-warning
indicators are essential.
The Van Thinh Phat case is not only a financial scandal but also a profound social lesson. If future
reforms can address the behavioral and structural weaknesses it revealed, Vietnam’s financial system
may emerge stronger and more resilient.

BÀI CỦA PHANH

The delisting of the shares of FLC Faros Construction Joint Stock Company, part of the FLC ecosystem,
is the first time that a stock that was once in the VN30 index, which had a major impact on the market
index has been forced to be delisted (1). In the world, the Enron Corporation's bankruptcy represented
the most significant corporate insolvency in the United States at that time. The executives of Enron were
characterized by a notable degree of hubris and, arguably, an exceptional level of arrogance. While the
responsibility of the company's leadership is evident, it is essential to examine the roles of other
stakeholders involved. This assignment will explore the potential impact of social dynamics on the
actions of the board of directors, financial analysts and other players in the case of Faros company in
particular and FLC group in general. To begin, we will present a contextual overview of the company.

THE PERFORMANCE AND BUSINESS OF FAROS AND FLC

FLC Faros Construction Joint Stock Company (ROS), a construction enterprise closely linked to the
FLC Group, was officially listed on the HOSE stock exchange in 2016. In the context of Vietnam’s
booming real estate and construction sectors, investor sentiment was extremely optimistic, leading to a
rapid surge in demand for related stocks. At its peak shortly after listing, ROS experienced an
extraordinary rise in stock price, largely fueled by speculative trading and market enthusiasm
surrounding its parent company, FLC Group.

From its founding in 2011 as a relatively unknown construction firm, ROS expanded aggressively,
securing large-scale contracts, especially for FLC’s resort and real estate projects. The company
presented an image of fast, sustainable growth, with impressive revenue figures and ambitious business
plans. However, there were limited questions raised regarding the authenticity of some of its contracts
and revenue streams, pointing to possible weaknesses in financial transparency. Despite these concerns,
ROS's financial statements during the early years after listing showed substantial growth, and its
Chairman, Trịnh Văn Quyết, significantly increased his stake and visibility, even briefly becoming the
wealthiest person on the Vietnamese stock exchange by declared stock ownership (2).
ROS has been "settled" in the top stock group in the market for over 3 years, both in terms of market
capitalization and liquidity. From an initial listing price of just 10,000 VND per share, it increased 17
times within just one year. The historical peak reached over 200,000 VND per share. By late 2017 and
into 2018, ROS’s stock price began to stabilize, no longer displaying the explosive growth seen
immediately after its listing. Market confidence gradually eroded as investors grew skeptical about the
company’s real business operations and the sustainability of its revenue model, particularly amid
broader tightening of market regulations. In 2022, after investigations into stock manipulation activities
by top executives, including Trịnh Văn Quyết, ROS faced serious legal and regulatory challenges.
Subsequently, ROS’s stock was suspended from trading at the price of less than 3,000 VND per share,
and by early 2023, it was officially delisted from HOSE, with the stock price having collapsed to
virtually worthless levels, causing massive financial losses for shareholders.

Figure 1 illustrates the trajectory of Faros's stock price from 2016 to 2022 in relation to the VN index.
To promote comparison, the VN index value is multiplied by 10 in the figure.

Not only ROS, the capital of the remaining units of FLC Group also increased rapidly in a short time.
The easy capital increase by creating accounting entries corresponding to the capital contribution
through loan, investment, advance payment, deposit, etc. entries has pushed FLC's charter capital to
exceed VND 7,000 billion up to the present time.

In addition, FLC continuously increases assets by "transferring money" from newly established
companies, which are subsidiaries, affiliated companies, and companies contributing capital from the
"FLC ecosystem" through the entries accounts payable, other payables, advance payments or short-term
- long-term loans, etc.

The question of who will be responsible for allowing Mr. Trịnh Văn Quyết and his accomplices to
successfully carry out the "spectacular scam" known as FLC Faros is a major concern for many
investors.

THE DIRECTORS
The corporate board of FLC Group was expected to oversee management decisions, ensure
transparency, and protect shareholder interests. However, in reality, the board failed to perform its
monitoring role effectively. Major decisions, particularly those concerning stock issuance, acquisitions,
and financial disclosures, were often driven by the executive leadership without sufficient scrutiny. The
lack of critical oversight contributed to a series of high-risk activities that eventually undermined the
company's financial health and reputation.

Although FLC Group’s board formally included external directors, doubts remain about the true
independence of these members. Many board members had professional or personal ties to the
management team, especially to Chairman Trịnh Văn Quyết. These relationships likely compromised
their ability to act independently and challenge executive decisions. As a result, the board functioned
more as a supporter of management than as an independent check, weakening the governance structure
intended to protect shareholders.

The governance issues at FLC Group were further complicated by the directors' personal financial
incentives. Some board members, directly or indirectly, benefited from the rising stock prices and
business expansion strategies pursued by the leadership. This alignment of personal gain with company
performance may have discouraged directors from raising concerns or resisting risky behavior. Self-
interest, rather than a commitment to sound governance and long-term company health, likely played a
significant role in the board’s passivity.
Loyalty to the company leadership and a culture of conformity within FLC’s boardroom fostered
groupthink. Directors were unlikely to challenge decisions or question the strategic direction taken by
the Chairman and his executive team. Instead of encouraging open discussion and diverse viewpoints,
the board appeared to favor consensus and compliance. This atmosphere stifled critical thinking and
allowed problematic practices to continue unchecked, contributing directly to the company’s eventual
crisis.

THE ANALYSTS
Analysts' herding behavior significantly contributed to the rise and eventual collapse of FLC Group's
stock price. During the real estate boom of the early 2010s, many analysts were inclined to align their
assessments with the optimistic narratives surrounding the company's rapid growth and aggressive
expansion strategies. Rather than providing independent and critical analysis, analysts often echoed one
another’s positive outlooks, driven by reputational concerns and fear of missing out on the potential
gains. This herding behavior, combined with weak regulatory oversight and a lack of accountability, led
to inflated stock valuations and a false sense of security among investors. When FLC’s governance
issues and fraudulent activities were uncovered, the stock price plummeted, leaving investors with
significant losses. Therefore, analysts' failure to challenge the prevailing market sentiment and conduct
thorough evaluations contributed to the formation of a speculative bubble that ultimately burst.

OTHER PLAYERS IN FLC’S DOWNFALL

The decline of FLC has not solely been attributed to the actions of directors and analysts. In Vietnam, a
considerable number of investors, particularly retail investors, exhibit a pronounced inclination towards
prioritizing short-term profits over long-term value creation. This short-term investment mindset is
significantly shaped by the rapid growth and volatility present in the nation's financial markets.
Furthermore, executives appear to be predominantly focused on short-term outcomes, potentially due to
the substantial portion of their compensation packages being tied to stock options. In instances where
investors display irrational behavior, managers may exploit temporary increases in stock prices, thereby
engaging in practices that align with the preferences of these investors.

In addition, Faros’s auditor, Hanoi Auditing and Accounting Co., Ltd., did not collect sufficient
authentic evidence of capital contributions, use of capital contributions and the ability to recover
investment trusts of Faros. cpa acknowledged that the financial statements and equity reports of Faros
and the collected documents were not sufficient grounds to give an opinion of full acceptance, but still
fully accepted because "FLC Group and companies in the ecosystem are large, regular customers, so the
issuance of reports and audits according to the wishes of the enterprise, although knowing it was against
the regulations, was still done to receive payment for the audit contract" or perhaps because of the huge
fee earned. On December 30, 2015, Mr. Do Nhu Tuan - General Director of Faros Company and Mr. Le
Van Do - Deputy General Director of Hanoi Auditing and Accounting Co., Ltd. - signed the Audit
Contract of Faros Company's Financial Statements for 2014, 2015 and the first 3 months of 2016 with a
value of 100 million VND (3).

Last but not least, The regulatory agencies that agreed to let ROS list "cannot be innocent". The first
"filter" is the listing licensing step. If it had been done responsibly, this would not have happened and
investors would not have suffered losses. At the time ROS was approved for listing, Mr. Tran Van Dung
was holding the position of General Director of HOSE and then in 2017, Mr. Dung became Chairman of
the Securities Commission. Recently, on May 19, 2022, Mr. Dung was disciplined and dismissed by
Finance Minister Ho Duc Phoc due to serious violations and shortcomings in his work, lack of
responsibility, lax leadership, direction, lack of inspection and supervision, allowing some organizations
and individuals to "violate the law, manipulate the market, and make illegal profits" (4).
The demise of FLC emphasized the need of maintaining a distinct identity for individuals inside
organizations. When delivering information on a company, whether as a board member, analyst, or
auditor, it's crucial to evaluate the issue objectively to avoid being influenced by social pressures.