Former US Treasury Secretary Larry Summers thinks the recent meltdown of crypto derivatives exchange FTX is a lot like the Enron scandal.
In a new interview with Bloomberg, the famous American economist says that FTX’s implosion is probably less about the complexities of crypto regulations and more about “some very basic financial principles that go back to financial scandals that took place in ancient Rome.”
Enron was an American energy company that had a valuation of $60 billion at its peak before it went bankrupt in late 2001 after a scandal unearthed a complex web of accounting fraud within the firm.
Says Summers of both Enron and FTX,
“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. I think the regulatory community ought to draw two lessons from this: one, if we had a few fewer economists and quants, and a few more forensic accountants running around, I think it would help us detect what was going on in countries and in companies…
And the other is, I think we ought to have a rule in everything that touches finance, that everyone who has anything to do with it in a position of responsibility, has to be entirely away from the office, away from their phone, away from any device and connection to the system, for a week or two continuously each year. And I suspect that that would be very helpful in causing some of these problems to come to light sooner.”
FTX had naming rights to the Miami Heat’s basketball stadium, but the team is reportedly severing ties with the company in the wake of the exchange’s bankruptcy.
