Abstract: Over the past recent years, the world has witnessed the downfall of large and prominent financial institutions. Financial distress and economic downturn have negatively affected the society at large. While it is acknowledged that the root of financial crisis is due to the heavily practiced of interest-based financing found in the subprime mortgage market, the present study advocates that the crux reason for such failures is pinned down to the unethical practices of the market players in the financial system. It is due to the inherent system that has driven them to misbehave and develop their greediness. Using Lehman brothers as the background, this study identifies various unethical issues. This study proposes Islamic ethical values and principles which are embedded in the Islamic financial system as a solution to curb and overcome financial crises.