Was FTX a Lehman or an Enron?

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Happy Sunday, and welcome back to Dry Powder.

It’s early innings, and the story is still unfolding, but the spectacular collapse of crypto exchange FTX may go down as ignominiously as Enron or Lehman. Billions of dollars have been lost (and as of Saturday morning, at least $1 billion in customer funds has reportedly “vanished.”) The S.E.C. and D.O.J. have already opened investigations. In today’s issue, I work my way around the story as it currently stands, looking at precedents, surveying the Wall Street consensus, and exchanging notes with people who were close to this fiasco when everything came crashing down.

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Was FTX a Lehman or an Enron?

Wall Street comes to terms with a generational financial tragedy.

WILLIAM D. COHAN

The first entry in Sam Bankman-Fried’s multi-tweet apology summed it all up perfectly. “I fucked up, and should have done better,” he wrote on Thursday, shortly after a liquidity crisis caused his crypto exchange company, FTX, to collapse. You can say that again, Sam. I’ve seen a few stunning implosions in my day—Drexel Burnham, Enron, Worldcom, Bear Stearns, Lehman—but the financial disaster that is, or was, FTX, is one for the ages. On Friday, FTX—the brainchild of the 30-year-old wunderkind, who was once worth $25 billion and supposedly the richest person under 30 years old, less than a year ago!—filed for bankruptcy in Delaware. FTX and its associated maze of more than 100 affiliates and subsidiaries was worth more than....

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