Was the fall of FTX really crypto’s ‘Lehman moment?’

The FTX collapse was bad, but how bad? Almost from the moment that the Bahamas-based exchange suspended cryptocurrency withdrawals in early November — and three days before it filed for bankruptcy — the historic comparisons started flying. 

Circle CEO Jeremy Allaire tweeted on Nov. 8 that FTX was “Lehman’s moment,” referencing the 2008 collapse of investment bank Lehman Brothers, which sparked a global financial panic. This analogy stuck, at least over the past four weeks. Even United States Treasury Secretary Janet Yellen employed it last week, telling DealBook:

“It’s a Lehman moment within crypto, and crypto is big enough that we’ve had substantial harm with investors.”

But, other business parallels have been drawn as well. FTX’s crash might have been more like the 2008 Madoff scandal, for example, given that both scamster Bernie Madoff and FTX founder Sam Bankman-Fried had a knack for “charming regulators and investors” and thus distracting them “from digging in and seeing what’s really going on,” as former Federal Deposit Insurance Corporation chair Sheila Bair told CNN.

Others suggested FTX’s precipitous bankruptcy actually was more like the Enron Corporation’s implosion of 2001. Among common elements, according to former U.S. Treasury Secretary Lawrence Summers, as reported by Bloomberg, were:

“The smartest guys in the room. Not just financial error but — certainly from the reports — whiffs of fraud. Stadium namings very early in a company’s history. Vast explosion of wealth that nobody quite understands where it comes from.”

Binance chief strategist Patrick Hillman drew similarities between Bankman-Fried and Theranos founder Elizabeth Holmes, whom he described as “completely delusional.”

And on it went.

Historic precedents can be elusive

“There’s no perfect comparison, of course,” Timothy Massad, a research fellow at the Kennedy School of Government at Harvard University and former chairman of the U.S. Commodity Futures Trading Commission, told Cointelegraph.

The key question, said Massad, who also served as the Assistant Secretary for Financial Stability of the U.S. Department of the Treasury, helping to manage the government’s response to the 2008 financial crisis, will it actually lead to the sort of regulation badly needed by the cryptocurrency industry, or:

“Will it just be a bigger version of Mt. Gox, which burned a lot of people but the crypto world just kind of went on.”

It isn’t…