FTX Mayhem Fails to Scare Futures Exchanges Away From Crypto


CME Group Inc. Chief Executive Officer Terry Duffy, who has been one of Bankman-Fried’s fiercest critics, said he won’t stop crypto-futures trading just because of “one bad actor.”

Even as some of Wall Street’s old guard has an “I-told-you-so” moment after the collapse of Sam Bankman-Fried’s FTX, futures exchanges aren’t giving up on crypto.

CME Group Inc. Chief Executive Officer Terry Duffy, who has been one of Bankman-Fried’s fiercest critics, said he won’t stop crypto-futures trading just because of “one bad actor.” Cboe Global Markets, another Chicago exchange, and software provider Trading Technologies also recommitted to digital assets in the wake of the FTX meltdown.

“I’m not prepared to say I’d delist it,” Duffy, 64, said in an interview this week, in which he recalled his spat with Bankman-Fried at an industry event in March. “We’ve been at the cutting edge of innovative products, but what we don’t do is do it in a reckless manner.”

Executives at futures exchanges had expressed concerns about FTX’s business model before the collapse. The bankruptcy of FTX potentially caused billions of dollars in losses for millions of account holders and sparked investigations into allegations of wrongdoing. It has also ensnared one of the biggest lenders in the crypto industry, Genesis, as well as Gemini, which halted redemptions, and BlockFi — a lender previously bailed out by FTX. 

“These events reinforce our strategy,” Chris Isaacson, chief operating officer and chair of Cboe’s digital board, said in an interview on Friday. “If there is ever a time where trust in markets need to be built and reinforced in digital assets, it’s now. That’s what we’re committed to doing.”

2008 Parallels

Isaacson said Cboe will continue with crypto-futures trading. Jason Shaffer, executive vice president of product management at Trading Technologies, said his firm will stay the course as well, and that customers want to engage in crypto in the same way they trade other currencies. 

At a Futures Industry Association event this week, conference goers compared FTX’s collapsed to energy trader Enron Corp., which went under in 2001 and became a symbol of corporate fraud. And Christy Goldsmith Romero of the Commodity Futures Trading Commission went as far as to draw parallels to the worldwide financial crisis.

“Opaque, complex, leveraged, unregulated products, highly interconnected market, concerns about the quality of underlying assets, high potential for contagion risk,” she said. “These are the types of things that existed in 2008 that I see parallels with now.”

Bankman-Fried was a driving force behind a failed campaign to penetrate traditional finance. He proposed handling every step in a crypto derivative transaction: clearing trades and eliminating the middlemen that in many cases help spread the risk. If approved by the CFTC, the plan could have increased risks for the traditional industry and disrupted business models like CME’s that have been around since the late 1800s.

Fierce Critics

The plan drew attacks from Wall Street firms and heightened calls for more oversight of Bankman-Fried’s firm and its rivals. The idea was “rubbish from Day 1,” Duffy said. “I’m surprised so many people were enamored by his nonsense.”

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

Bankman-Fried, 30, has been a key donor to the Democratic party. He gave nearly $40 million to candidates in the past two years, nearly all to Democrats, and has visited lawmakers in an effort to affect developing crypto regulations.

Duffy said he hoped politicians who received the donations from Bankman-Fried would return them, adding “I never bought into the whole thing.” Politicians who accepted his money will be quick to show “they are not influenced by that,” Sprecher said.

Regulators are probing whether Bankman-Fried and his associates misused customer funds, and his company’s collapse is adding urgency to a Washington push to transform the CFTC into a top crypto watchdog, the agency’s Chairman Rostin Behnam said in an interview at the FIA event. 

Crypto Comeback

While the industry may take a breather for now, it will come back when confidence is restored, said Ram Vittal, North America CEO at Marex Group, a futures and options broker that has a partnership with Coinbase. 

“What is the ingredient that will be the spark?” Vittal asked. “The proper regulatory framework that allows everybody a lot more conviction so that some of these FTX-like things don’t happen.”

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

“It’s dangerous to say there’s no value in crypto or the underlying technology because Sam did X, Y or Z,” he said. “Seeing what happened post-Enron, there may be a lot of opportunity for a reputable company with strong governance to pick up the pieces of FTX.”


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