FTX and “The Money Noose”: Scott Skyrm On The Fall of MF Global

Forward Guidance

Scott Skyrm, Executive Vice President in fixed income and Repo at Curvature Securities, joins Jack Farley to share insights from his book “The Money Noose: Jon Corzine and the Collapse of MF Global.” Scott and Jack explore the startling parallels between the fall of the futures brokerage MF Global in 2011 and the recent collapse of cryptocurrency exchange FTX: the merging of proprietary trading with a brokerage, the illusion of “risk-free” trades funded with borrowed money, the liquidity mismatch between liabilities and assets, the misuse of client funds, the stubborn CEO with political connections and heavy risk appetite who is surrounded by “yes men,” and an alleged acquisition by a supposed savior that is later terminated (Binance for FTX, Interactive Brokers for MF Global).

Jack explains why it is his opinion that the fall of FTX is much “worse” than the the MF Global, in that at MF Global the use of customer funds was a last resort, where in the case of FTX, it is Jack’s reading that FTX likely misused (or at least “mislabelled) its customer funds well before its liquidity crisis. Lastly, Scott shares his outlook on the repurchase (“repo”) markets in 2022, as well as the Fed’s dilemma between price stability and financial stability.

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Timestamps:

(00:00) Intro

(01:18) Is FTX The New MF Global?

(02:24) MF Global's Transformation After 2008

(11:07) Can Broker Dealers Touch Client Funds?

(20:11) Lack Of Controls At MF Global And FTX

(23:29) Cross-Margining

(32:52) MF Global's Risky Repo-To-Maturity Trades

(40:54) The Risks Of Repo-To-Maturity Trades

(43:19) FTX's Imaginary Tokens: FTT & SRM

(47:40) MF Global's Ultimate Fate

(53:59) The Fed's Dilemma

(58:51) The Repo Market in 2022

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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.