¡°No one saw this coming¡± has been a common refrain in the financial world since the swift disintegration of Sam Bankman-Fried¡¯s cryptocurrency empire. Nowhere is that sentiment more plain to see than in the letters sent to U.S. regulators in support of FTX¡¯s application for a controversial plan that would have revolutionized trading of derivatives, a heavily regulated corner of Wall Street.
From Fidelity Investments to Fortress Investment Group, Susquehanna International Group and Virtu Financial, from faculty members at Georgetown, the University of Chicago, William & Mary and Stanford, from the Jones Day law firm and the Heritage Foundation think tank, hundreds of letters in support of FTX¡¯s plan landed with the Commodity Futures Trading Commission (CFTC) earlier this year.
Collectively, the comments highlight how, even in some of the most sophisticated corridors of finance, Bankman-Fried¡¯s operation had been looked upon as an important source of innovation with the potential to helpfully disrupt not just the crypto industry but traditional markets as well. Instead, FTX¡¯s collapse revealed a tangle of businesses rife with the potential for conflicts. Scant oversight jeopardized customers¡¯ funds, leaving a gaping balance-sheet hole that sent the firm into bankruptcy.
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