The guy who oversaw Lehman’s restructuring says FTX is the sequel, but ‘this is a crypto blizzard and not a crypto winter’

Sam Bankman-Fried
Sam Bankman-Fried.
Michael M. Santiago—Getty Images

The collapse of crypto exchange FTX can be compared to the bankruptcy of Lehman Brothers that shook Wall Street 14 years ago, according to former Lehman restructuring head Mark J. Shapiro. 

“FTX is the Lehman of the crypto industry,” as the resulting damage is still contained to the sector, Shapiro said in the latest episode of Bloomberg Intelligence’s FICC Focus State of Distressed Debt podcast. “This is a crypto blizzard and not a crypto winter, because there’s no spillover yet.” 

Shapiro, who was the head of restructuring at Lehman Brothers when it collapsed in 2008, is a financial restructuring and insolvency partner at Shearman & Sterling in New York. He discussed overseeing the sale of Lehman’s U.S. assets in Chapter 11 and predicted a sophisticated and detailed examination of the FTX books will be necessary to determine what value remains. 

In a way, “it’s apples and oranges,” to compare the FTX case to that of Lehman, which ultimately returned around 45 cents on the dollar to many creditors, Shapiro said, because “Lehman had a real asset base,” he said, whereas that of FTX is ephemeral.  

Some traders are nevertheless making bets regarding the eventual return on FTX claims — though they have pegged their value much lower, at between five and eight cents on the dollar. 

Ultimately, the pain spreading through crypto after FTX filed for bankruptcy Nov. 11 will separate winners from losers within the industry, Shapiro said. 

“The weak ones will ultimately go away and the strongest will survive — people like Coinbase and Galaxy that seem to have strong balance sheets and much tighter compliance and regulatory frameworks than FTX, for example,” he said.  

Shapiro’s assessment echoed a similar one provided to Congress on Tuesday by John J. Ray, who took over as chief executive officer at FTX when Samuel Bankman-Fried resigned last month. Ray’s job is to restructure FTX and determine how it lost billions of dollars and whether investors will receive any compensation, a role he took on at Enron Corp. after the energy firm’s spectacular 2001 collapse.

Ray told a House committee today that the issues at FTX were “old-fashioned embezzlement” compared to the “sophisticated” crimes at Enron.

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