Ftx, will it be the Lehman Brothers of crypto-finance? What’s behind the collapse- Corriere.it

If it is the Lehman Brothers of crypto-finance we will understand it in the coming days, perhaps in the next few hours. But behind the collapse of FTX, the fourth largest platform in the world for trading crypto-currencies, there are all the ingredients of a systemic shock that spreads the contagion to the whole world of digital finance and beyond. Not for nothing yesterday the S & P500, the main list of New York, closed with a fall of 2.08% due to the waves of panic that are radiating from the Bahamas where Ftx has its base of operations.

The stop to the withdrawal of depositors

The definitive trigger was the refusal of the rival platform Binance to rush to the rescue of FTX after the latter closed to depositor withdrawals. Financial volumes still difficult to quantify, but potentially equivalent to several tens of billions of dollars, remain stuck in that black hole that today Ttx. The platform on the verge of bankruptcy, probably after having burned down (at least) tens of thousands of investors. Its founder and charismatic boss, 30-year-old perpetually in shorts Sam Bankman Fried, stop making donations to politicians, handsomely inviting Bill Clinton, Tony Blair or pop star Katy Perry to her conventions in the Bahamas. and to be interviewed by the big global financial press in restaurants overlooking the Caribbean beaches where Daniel Craig shot his scenes of James Bond emerging from the water. He will no longer have personal assets valued at $ 23 billion, as he did a few months ago. Rather, Bankman-Fried will have to answer many of the same questions that US financial regulators asked Bernie Madoff years ago. And financial regulators in turn will have to explain how it is possible that such large volumes of transactions, without some customer selection at access, could have taken place in such opacity.

Customers’ money to cover losses

The now widespread suspicion that Ftx has given rise to a classic scam, albeit with the modern characteristics of the crypto industry. Simply, in the last few months Bankman Fried must have transferred billions of financial volumes owned by his clients to support trading in Fft (a cryptocurrency) of his investment firm Alameda Research. This used the clients’ money not to invest it, but to plug the holes in the losses on his own investments. And he lost everything Not just a young man with few scruples to lose his reputation and the money of those who believed in him. Big names in traditional finance had also invested in its FTX platform, from Wall Street to Californian venture capital.

From Blackrock to Sequoia, the big customers

Among those who lose their clients’ money through FTX is Blackrock, the world’s largest asset manager, Softbank, as well as venture capital funds such as Greylock or Sequoia. The latter has already had to spread an embarrassed note to customers in which he announces that some investments surprise on the upside, others downwards and the holding in Ftx has been devalued to zero. In the last year, moreover, the market value of all cryptocurrencies collapsed from over 2.8 trillion dollars to 766 billion dollars. The end of almost fifteen years of incredible monetary expansion by the Federal Reserve and the main central banks of the planet has made a decisive contribution to inflating financial bubbles, among which that of crypto currencies is perhaps the most illogical: not the largest in terms absolute (a record that perhaps belongs to the Big Tech champions).

The effects of monetary tightening

Now the monetary tightening triggered by inflation brings the tide down. And it reveals, as Warren Buffett puts it, who was swimming without a suit. Or maybe he pretended to reign in short over a new sector of international finance left to grow without rules, nor supervision, nor an obvious public utility. Tony Blair or Bill Clinton are left with commissions for attending FTX conferences in the Bahamas. Who knows how many millions of ordinary people dazzled by digital stardust are left with the losses after the great drunkenness of crypto-currencies.