Macroscope | What FTX collapse, Britain’s mini-budget disaster and South Korea’s credit crunch have in common

As recently as July last year, Sam Bankman-Fried – the founder of FTX, the high-flying cryptocurrency group valued at US$32 billion before it filed for bankruptcy protection in the United States last Friday – said he could envision buying Goldman Sachs.

After what has been revealed about the depth of the financial hole in his cryptocurrency empire – FTX’s main international exchange had just US$900 million in liquid assets against US$9 billion in liabilities just before its demise – such aspirations seem grotesque.

Yet, what is remarkable is not that Bankman-Fried, known to the cryptocurrency world as SBF, thought he could be taken seriously but that some of his most prominent financial backers were cheerleaders for FTX. Bankman-Fried himself cosied up to regulators and politicians, presented himself as altruistic and was seen as one of the most trustworthy entrepreneurs in a freewheeling and fraud-ridden industry.

While much is unknown about the circumstances leading up to FTX’s collapse, its governance and financial controls were shockingly weak. The company’s exchange – which was the second-largest in the cryptocurrency space – lent billions of dollars of customers’ assets to fund risky bets by SBF’s proprietary trading firm, Alameda Research, setting the stage for the implosion of the business.

However, it should have been clear to investors some time ago that FTX was a time bomb. The financial excesses that contributed to its demise – rapid leverage-led growth, reckless investments and heavy losses – were bound to come home to roost as the era of cheap money came to an end, putting the finances of companies and countries under much more scrutiny.