Former U.S. Treasury Secretary Larry Summers is likening the collapse of troubled cryptocurrency exchange FTX to the meltdown that engulfed Houston-based energy company Enron two decades ago.
In an interview with Bloomberg Television’s “Wall Street Week,” Summers said regulators ought to draw a few lessons from the FTX episode. One is the need for “more forensic accountants” to help detect issues at both the corporate and national level, he said.
The swift collapse of FTX was underscored on Friday by the company’s announcement that it had begun Chapter 11 bankruptcy proceedings in a Delaware court and that its chief executive, Sam Bankman-Fried, had resigned. John J. Ray III, the lawyer who was brought in to clean up the mess left at Enron, was appointed to succeed Bankman-Fried. The announcement rattled the cryptocurrencies sector, where the price of Bitcoin
touched a two-year low after FTX’s announcement.
See: Bitcoin falls to 2-year low, other cryptos down after market reacts to FTX bankruptcy news
“A lot of people have compared this to Lehman. I would compare it to Enron,” Summers reportedly said.
Enron is the once high-flying energy trading company that collapsed in late 2001 amid accusations of accounting fraud, and changed the way investors looked at stock recommendations and at corporate executives. At the time, it was the biggest corporate failure in American history and its collapse is considered to be one of the biggest market events of the past quarter-century.
Read: Enron workers lost everything
Bloomberg also reported that Bankman-Fried’s $16 billion fortune has evaporated within a matter of days.
See: Who is Sam Bankman-Fried, the FTX ex-CEO who lost billions in crypto?
As of Friday, all three major U.S. stock indexes
were mixed. The bond market was closed for the Veterans Day holiday.