The Lehman Brothers of Crypto: Here's how the fall of Sam Bankman-Fried's FTX compares to the collapse that sparked the Great Financial Crisis

The Lehman Brothers of Crypto: Here's how the fall of Sam Bankman-Fried's FTX compares to the collapse that sparked the Great Financial Crisis
AP Images

Welcome back to Opening Bell, team. I'm Phil Rosen. In light of all the crypto hubbub last week, today we're skipping the econ lesson and pivoting instead to history.


You've seen the movie "The Big Short," right? It gives maybe the clearest, most entertaining breakdown of how many, many very bad bets on subprime mortgages kickstarted the 2008 Financial Crisis.

The most serious domino to fall 14 years ago was Lehman Brothers, the classic too-big-to-fail behemoth that did in fact go under.

All this is a roundabout way of saying the collapse of Sam Bankman-Fried's crypto exchange, FTX, is severe and dramatic enough to warrant its own movie in a few years.

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1. In the last few days, I've had many conversations with Wall Street and blockchain execs who have drawn comparisons between FTX's demise and that of Lehman Brothers in 2008.

My main question has been: Is FTX crypto's Lehman Brothers?

The consensus seems to be a resounding "kind of."

Reminisce with me for a moment: In the years leading up to 2008, Lehman Bros loaded up its balance sheet with huge amounts of subprime mortgage debt.


But virtually overnight the value of those holdings evaporated as the housing market collapsed. Lehman went under, and the world sunk into its worst financial crisis since the Great Depression.

Meanwhile, the FTX empire similarly collapsed last week because its balance sheet was weighed down by an asset — its native FTT token — that saw its value virtually hit zero overnight. It raised serious concerns about the solvency of its companies and sparked a domino effect that led to Friday's bankruptcy filing.

But Jan Szilagyi, chief executive of financial services firm Toggle AI, told me that the size of Lehman, for starters, made for a much more tumultuous fallout than anything a crypto firm could bring.

"An organization like Lehman would be at the heart of a relatively complex financial system, fixed and extended into mortgages, extended to consumer loans, extended into obviously trading and so on," Szilagyi said.

Because people don't borrow in crypto to pay for mortgages or credit cards, he added, there's less risk of a contagion hitting mainstream markets.


That doesn't mean contagion can't bring down the crypto sector, however.

"The crypto ecosystem has been made fragile by leverage and interconnectedness, just as the traditional financial system was fragile because of leverage and interconnectedness in 2008," Hilary Allen, a financial regulation expert at American University, told me a couple days ago.

"The primary use of crypto is speculation, and so its failure is unlikely to have broader repercussions so long as the traditional financial system has no significant exposure to crypto," she noted.

Lehman or not, risks remain for players big and small in the digital asset space.

There's no lender of last resort for a crypto firm today, unlike in 2008 with Wall Street, but David Siemer, CEO of Wave Financial, told me a new renaissance of regulation could emerge from FTX's ashes. In his words:


"The industry needs to mature before it can recover, whether this comes from enhanced government policies on how to interact with crypto, or more sophisticated asset managers handling the movement of large sums of assets."

What do you think is the more likely result of the fall of FTX?

A) Significantly tighter regulation of crypto in the US and globally

B) The market recovers and it's eventually back to business as usual

Let me know on Twitter (@philrosenn) or email me (


In other news:

The Lehman Brothers of Crypto: Here's how the fall of Sam Bankman-Fried's FTX compares to the collapse that sparked the Great Financial Crisis
Traders on the floor of the New York Stock Exchange (NYSE)Spencer Platt/Getty Images

2. US stock futures fall early Monday, after voting member Christopher Waller said the Fed's not "softening" on inflation and the endpoint of rate hikes is likely "a ways off". Here are the latest market moves.

3. Earnings on deck: SMC Corp., Tyson Foods Inc., and more, all reporting.

4. America's biggest wealth manager explained why he's telling clients that going all-in on stocks is the right move now. Acclaimed expert Peter Mallouk shared how he's recommended people invest in stocks and bonds amid uncertainty — and why real estate investing is still a no go.


5. Stocks could see a bull run in 2023 but that doesn't mean inflation won't stay sticky. Bank of America analysts forecasted that prices will remain high heading into next year and the Fed will keep hiking rates — unless a recession hits.

6. The former chief economist of PIMCO said the Fed has smashed the housing market and killed rampant speculation. He pointed to the doubling of mortgage rates and trouble in crypto as signs that the Fed has sufficiently tightened its monetary policy. "I think we're almost there."

7. The latest CPI report was a game changer for the stock market and a 25% rally could be coming in the next 50 days. That's according to Fundstrat's Tom Lee. He thinks favorable inflation data could repeat again next month, which suggests the Federal Reserve may have a better shot of a soft landing.

8. Goldman Sachs shared an options trading strategy with an 18-year track record of adding income to investors' portfolios. As forecasts over consumer price data and recession fears loom, the firm laid out which bets can withstand a choppy macro environment. See how analysts explained the strategy here.

9. The manager of an international Fidelity fund broke down why he invests without obsessing over traditional valuation metrics. This portfolio manager runs the firm's market-crushing international small-cap, and revealed why it's set to keep outperforming even as a recession nears. He shared the details into how a batch of companies has helped him beat 91% of competitors this year.


The Lehman Brothers of Crypto: Here's how the fall of Sam Bankman-Fried's FTX compares to the collapse that sparked the Great Financial Crisis
Bitcoin price on 14 November, 2022Markets Insider

10. El Salvador didn't have any bitcoin holdings in FTX. At least that's what Binance's CEO tweeted out: "I exchanged messages with President Nayib a few moments ago. He said 'we don't have any Bitcoin in FTX and we never had any business with them. Thank God!'"

Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.

Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.