 ‘A lot of people have compared this to Lehman. I would compare it to Enron’: Larry Summers has some choice words for Sam Bankman-Fried and FTX

Steve Mollman

The FTX downfall is not so much a Lehman moment as an Enron one.&nbsp;<div class="paywall-selector"></div><div class="paywall">



So says former Treasury Secretary Larry Summers about the once-heralded cryptocurrency exchange that today<a href="https://fortune.com/2022/11/11/ftx-chapter-11-bankruptcy-sam-bankman-fried-resigns/"> declared bankruptcy</a> and announced the resignation of founder and CEO Sam Bankman-Fried after a sudden and dramatic collapse this week.



“A lot of people have compared this to Lehman. I would compare it to Enron,” the Harvard professor said Friday on Bloomberg Television’s Wall Street Week. “The smartest guys in the room,” he said, name-checking a <a href="https://www.rottentomatoes.com/m/enron_the_smartest_guys_in_the_room">business-journalism classic</a> that revealed how Enron kept a false set of books before its own spectacular implosion. “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.”



Enron, of course, was a Houston-based energy company whose bankruptcy and epic accounting scandal in 2001 also destroyed Arthur Andersen, taking the “Big Five” accounting firms down to today’s “Big Four.” A 2005 documentary entitled Enron: The Smartest Guys in the Room charted the disaster that altered the business landscape and led to stricter rules on financial reporting for public companies.



Lehman Brothers, by contrast, was the Wall Street investment bank whose involvement in the subprime mortgage crisis triggered the bankruptcy that kickstarted the epochal 2007-2008 financial crisis. That scandal is widely blamed on excessive risk-taking and unethical management practices.



FTX was valued at $32 billion earlier this year, but questions about its health arose just days ago, setting off a modern-day variation of a bank run: a race by FTX users to withdraw their assets. According to reporting <a href="https://www.coindesk.com/business/2022/11/02/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet/">by CoinDesk</a> then the <a href="https://www.wsj.com/articles/ftx-tapped-into-customer-accounts-to-fund-risky-bets-setting-up-its-downfall-11668093732">Wall Street Journal</a>, FTX lent billions of dollars to affiliated trading arm Alameda Research, money that was used to fund risky bets. Venture capital giant Sequoia<a href="https://fortune.com/2022/11/10/ftx-sam-bankman-fried-sequoia-writes-down-214-million-investment-to-zero-venture-capital-crypto/"> said this week</a> it will write down its $214 million investment in FTX to zero.



<h2 class="wp-block-heading">Lessons of FTX downfall </h2>



It’s still not clear, though, exactly what went wrong: Was it an Enron or a Lehman-style collapse? Summers, for one, believes the lessons to be drawn from FTX’s downfall center around accounting.&nbsp;



“The regulatory community ought to draw two lessons,” said Summers of the FTX fiasco. One, more forensic accountants are needed to help detect issues at both the corporate and national level.&nbsp;



The second lesson is less obvious: For “everything that touches finance,” he said, people in positions of responsibility should be forced each year to take a week or two off, disconnected from work. Why? If they don’t, he argued, executives engaged in financial wrongdoing can constantly monitor their positions to keep problems secret.



Summers said the FTX downfall is likely more about classic financial fraud and “less about the complexities of the nuances of the rules of crypto regulation.”



Enron showed up in another way on Friday. As part of FTX’s bankruptcy proceedings, Bankman-Fried was replaced by John J. Ray III, a restructuring lawyer who has served senior roles in many other bankruptcies—including Enron.</div>

Lessons from the FTX collapse center more around accounting than crypto complexity, believes ex-Treasury Secretary Larry Summers. 

Larry Summers: FTX collapse more like Enron than Lehman

Former Treasury Secretary and current Harvard Professor Larry Summers

Sign up for the <a href="https://mynewsletters.fortune.com/fortune-features">Fortune Features</a> email list so you don’t miss our biggest features, exclusive interviews, and investigations.

F-BreakingNews

Cryptocurrency

Finance

Larry Summers: FTX collapse more like Enron than Lehman | Fortune

Allie Garfinkle

Mira Murati’s reported $2 billion ‘seed’ funding suggests the AI boom is alive and well, even after a week of economic chaos

/2025/04/10/mira-murati-2-billion-seed-raise-ai-boom-economic-chaos/

Paolo Confino

President Donald Trump and Chinese President Xi Jinping

 The U.S. is now gearing up for a confrontation with China, which some say was the plan all along

/2025/04/10/the-u-s-is-now-gearing-up-for-a-confrontation-with-china-which-some-say-was-the-plan-all-along/

Stuart Dyos

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City.

Tech-heavy Nasdaq sinks 4.3% Thursday after Trump imposes 145% tariffs on Chinese imports

/2025/04/10/nasdaq-dow-jones-industrial-average-sandp-500-nasdaq-composite-tariffs-china-liberation-day-market-outlook-stocks/

Bernard Condon

The Associated Press

Marjorie Taylor Greene wears a hat reading "Trump was right about everything"

Rep. Marjorie Taylor Greene scooped up shares of Amazon and Dell when stocks were down 40% from Trump’s tariff whiplash

/2025/04/10/rep-marjorie-taylor-greene-scooped-up-shares-of-amazon-and-dell-when-stocks-were-down-40-from-trumps-tariff-whiplash/

Annie Massa

Sridhar Natarajan

Hannah Levitt

Bloomberg

JPMorgan analyst’s ‘redacted’ report spells out fear of Trump

/2025/04/10/jpmorgan-redacted-report-trump-tariff-economy-fears/

Jack Dura

The Keystone oil pipeline spilled over 147,000 gallons of Canadian oil destined for U.S. refineries

/2025/04/10/keystone-oil-pipeline-spill-crude-refineries-canada-south-bow/

Dave Smith

Canada's largest telecom is duking it out with SpaceX, insisting Starlink and Elon Musk shouldn't be eligible for millions in subsidies

https://fortune.com/2025/04/09/elon-musk-starlink-canada-subsidies-crtc-bell/?itm_source=parsely-api

Preston Fore

Billionaire Warren Buffett made his first million by 32—now he’s telling Gen Z that the key to getting rich isn’t just hard work, but the company you keep

https://fortune.com/2025/04/08/billionaire-warren-buffett-self-made-millionaire-by-age-30-secrets-to-gen-z-sucess/?itm_source=parsely-api

Eleanor Pringle

'Nobody’s ever heard of it. It’s gonna be a record': Donald Trump is claiming victory for the stock market’s rebound

https://fortune.com/2025/04/10/trump-market-rebound-tariffs-art-of-the-deal/?itm_source=parsely-api

Marco Quiroz-Gutierrez

The Biden administration gave TSMC billions to build its semiconductors in the U.S., but Trump says he threatened 100% tariffs and got the company to double down

https://fortune.com/2025/04/10/tsmc-donald-trump-tariffs-semiconductors-chips-act/?itm_source=parsely-api

Orianna Rosa Royle

Cofounder of $12 billion crypto company says Gen Z new hires 'create an absurd amount of chaos' and make him want to pull his hair out—but he's betting on them anyway

https://fortune.com/2025/04/10/billionaire-crypto-boss-says-gen-z-new-hires-create-absurd-amount-of-chaos-but-hes-betting-on-them-anyway/?itm_source=parsely-api

Barbara Ortutay

Meta whistleblower claims tech giant built $18 billion business by aiding China in AI race and undermining U.S. national security

https://fortune.com/2025/04/09/meta-whistleblower-senate-testimony-ai-race-china-national-security/?itm_source=parsely-api