I think it’s a strange part of human psychology to ignore objective reality and double down to complete ruin. It seems remarkably common and with corporate power being so concentrated at the top it seems rather easy for these situations to happen.
I think the reason is that safety nets our system provides to big businesses (especially "too big to fail" ones) incentivizes them to take risks. If you have a 50/50 chance to strike gold or loose tons of someone else's money, why not take it. If it pans out, you get a lot of bonus $$$, if it doesn't - it's no skin off your back.
I see this in my industry. Above a certain level there isn’t really a failure state that matters to an individual.
Yes, it’s the throwing good money after bad problem. I think there’s a real name for it, “sunk cost” fallacy maybe?
I'm thinking "lender of last resort"
most crypto trading firms have been rewarded for this behavior over the last few years, so the lesson is hard to unlearn