In a recent interview on Bloomberg TV with Larry Summers, on November 11, 2022, he said “A lot of people have compared the FTX meltdown to Lehman. And he would compare it to Enron.”
Lawrence (Larry) H. Summers is the Former United States Secretary of the Treasury. In a recent interview he shared his thoughts over a question asked by David Westin, Bloomberg TV reporter, about the FTX collapse.
He said that “If we had fewer economists and quants and more forensic accountants running around, I think it would help us detect what was going on in countries and companies.”
FTX Collapse
From the recent crypto happenings, FTX filed for chapter 11 bankruptcy on November 11, 2022. It must be noted that over 130 entities linked with the FTX.com, FTX US and Alameda Research Ltd. were listed in filings as per the Federal Court in Delaware.
Moreover the Alameda petition listed assets and liabilities of at least $10 Billion each. Also, this huge amount made it the biggest bankruptcy in the US this year. It clearly affected the crypto investors across the world.
As we know FTX filed for Chapter 11 bankruptcy, the crypto exchange made the clarification that certain entities have not commenced voluntary chapter 11 proceedings in the United States.
According to the press release, the subsidiaries which were not included in the Chapter 11 proceedings are LedgerX LLC, FTX Digital Markets Ltd., FTX Australia Pty Ltd., and FTX Express Pay Ltd, FTX Capital Markets LLC, Embed Financial Technologies Inc., and Embed Clearing LLC.
FTX also added that FTX Group does not own or control Bitvo Inc. and BTC Africa S.A. and its respective subsidiaries.
Lehman and Enron Collapse
In early 2000s, Lehman Brothers, an American Global Financial Services Firm, filed for bankruptcy, While it was the fourth largest investment firm in the United States. But it ceased its operations on September 15, 2008 as the massive exodus of clients took place.
As Mr. Summers said in his recent interview that many people compared this FTX collapse with Lehman Brothers collapse, but he did not think the same. He compares the whole incident with the Enron scandal.
The Enron scandal was an accounting scandal involving the Enron Corporation. During 2001 after a series of revelations involving irregular accounting processes bordering on fraud perpetrated throughout the 1990s involving Enron and its accounting firm, Arthur Andersen, Enron noted the largest Chapter 11 bankruptcy at that time.
Additionally, this scandal affected the indictment of many other firm’s executives and also caused the downfall of its accounting firm, Arthur Andersen.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2022/11/13/find-here-how-larry-summers-compared-ftx-meltdown-to-enron-scandal/