FTX Mayhem fails to scare future exchanges away from crypto


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dated: 2022-11-19 19:55:39 .

(Bloomberg) — While some of Wall Street’s old guard are having an “I told you so” moment after the collapse of Sam Bankman-Fried’s FTX, futures exchanges aren’t giving up on crypto.

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Terry Duffy, CEO of CME Group Inc., who has been one of Bankman-Fried’s harshest critics, said he would not stop crypto futures trading just because of “one bad actor.” Cboe Global Markets, another Chicago stock exchange, and software vendor Trading Technologies also re-entered digital assets after FTX’s decline.

“I’m not ready to say I would delist him,” Duffy, 64, said in an interview this week, recalling his spat with Bankman-Fried at an industry event in March. “We’ve introduced innovative products, but what we don’t do is be ruthless.”

Futures executives expressed concern about FTX’s business model before the collapse. The FTX bankruptcy caused potentially billions of dollars in losses for millions of account holders and sparked investigations into allegations of abuse. It also snagged one of the biggest lenders in the crypto industry, Genesis, as well as Gemini, which halted buyouts, and BlockFi — a lender previously bailed out by FTX.

“These events reinforce our strategy,” Chris Isaacson, Cboe’s chief operating officer and chairman of the digital committee, said in an interview Friday. “If ever there was a time to build confidence in markets and strengthen digital assets, it’s now. That’s what we stand for.”

Isaacson said Cboe will continue to trade crypto futures. Jason Shaffer, executive vice president of product management at Trading Technologies, said his company will also stay the course and that users want to work with cryptocurrencies the same way they trade other currencies.

At a Futures Industry Association event this week, conference attendees compared FTX’s collapse to energy trader Enron Corp., which collapsed in 2001 and became a symbol of corporate fraud. And Christy Goldsmith Romero of the Commodity Futures Trading Commission went so far as to draw parallels with the global financial crisis, saying the crypto industry is opaque, complex, leveraged and full of unregulated products that led to the 2008 crash.

Bankman-Fried was the initiator of the failed campaign to penetrate traditional finance. He suggested handling every step of a crypto derivatives transaction: clearing trades and removing middlemen who, in many cases, help spread risk. If the CFTC were to approve the plan, the plan could increase risks to traditional industries and disrupt business models like CMEs, which have been around since the late 1800s.

The plan drew attacks from Wall Street firms and prompted calls for greater oversight of Bankman-Fried’s company and its competitors. The idea is “day one garbage,” Duffy said. “I’m surprised so many people were delighted by his nonsense.”

Another critic of the plan was ICE founder and CEO Jeff Sprecher. At an FIA event in Chicago on Tuesday, he said, “In general, you can’t have an exchange, a market maker and a clearing and settlement organization all under the same roof.”

Read more: FTX’s Crypto Kids Get Perilously Close to Upending Futures

Bankman-Fried, 30, was a major contributor to the Democratic Party. He has given nearly $40 million to candidates in the past two years, almost all of it to Democrats, and has visited lawmakers to influence the development of crypto regulations.

Duffy said he hoped politicians who received Bankman-Fried’s donations would pay it back, adding, “I was never involved in the whole thing.” The politicians who took his money will quickly show “that they are not under his influence,” the speaker said.

Regulators are investigating whether Bankman-Fried and his staff embezzled client funds, and the collapse of his firm adds even more urgency to Washington’s efforts to transform the CFTC into a top crypto watchdog, agency chairman Rostin Behnam said. in an interview at an FIA event. While the industry can breathe a sigh of relief for now, it will bounce back when confidence returns, said Ram Vittal, CEO of Marex Group North America, a futures and options broker partnered with Coinbase.

“What is the ingredient that will be the spark?” Vittal asked. “It’s a real regulatory framework that allows everyone a lot more confidence so that some of these things like FTX don’t happen.”

Rob Creamer, CEO of Chicago-based proprietary trader Geneva Trading and chairman of the FIA’s Master Traders Group, said there could also be opportunities.

“It’s dangerous to say that crypto or the underlying technology has no value because Sam did X, Y or Z,” he said. “Given what happened after Enron, there could be many opportunities for a serious company with strong leadership to pick up the pieces of FTX.”

– With the support of Yueqi Yang.

(Correct Jason Shaffer’s title in paragraph six.)

Most read according to Bloomberg Businessweek

©2022 Bloomberg LP


FTX Mayhem fails to scare future exchanges away from crypto

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