Millions unaccounted for may be one of the biggest scams of the century. The collapse of cryptocurrency exchange FTX amid reports that at least $1 billion in client funds disappeared, impacting potentially around a million customers, has prompted comparisons to some of the most notorious financial scandals in recent decades, yet the magnitude of customers impacted is much larger.
FTX, which at its peak was the third-largest cryptocurrency exchange, filed for Chapter 11 bankruptcy protections on Friday, and the company confirmed over the weekend that millions of dollars worth of assets are unaccounted for.
The company's founder, Sam Bankman-Fried, faces allegations that he secretly transferred $10 billion from FTX to Alameda Research, his hedge fund that also filed for bankruptcy. The company is facing a criminal probe in the Bahamas, and on Tuesday, Senate Banking Committee Chairman Sherrod Brown, D-Ohio, called on Bankman-Fried to appear before his panel.
Former Treasury Secretary Larry Summers said FTX's collapse has similarities to some of the most significant bankruptcies in recent decades.
"A lot of people have compared this to Lehman. I would compare it to Enron," Summers told Bloomberg's Wall Street Week. Summers described some aspects of FTX's downfall that reminded him of Enron: "The smartest guys in the room. Not just financial error but, certainly from the reports, whiffs of fraud. Stadium namings very early in a company’s history. Vast explosion of wealth that nobody quite understands where it comes from."
