November 17th 2022

Over the past week we have been watching the collapse of the crypto universe with grim fascination. Only recently, Sam Bankman-Fried was in the stratosphere. FTX, his cryptocurrency exchange, then the third-largest, was valued at $32bn; his own wealth was estimated at $16bn. To the gushing venture capitalists of Silicon Valley he was the financial genius who could wow investors while playing video games, destined, perhaps, to become the world’s first trillionaire.
 
Today there is nothing left but 1m furious creditors, dozens of shaky crypto firms and a proliferation of regulatory and criminal probes. The more that comes out about the demise of FTX, the more shocking the tale becomes. The exchange’s own terms of service said it would not lend customers’ assets to its trading arm. Yet of $14bn of such assets, it had reportedly lent $8bn-worth to Alameda Research, a trading firm also owned by Mr Bankman-Fried. In turn, it accepted as collateral its own digital tokens, which it had conjured out of thin air. A fatal run on the exchange exposed the gaping hole in its balance-sheet. To cap it all, after FTX declared bankruptcy in America, hundreds of millions of dollars mysteriously flowed out of its accounts. 
 
The high-speed implosion of FTX has dealt a catastrophic blow to an industry with a history of failure and scandals. Never before has crypto looked so criminal, wasteful and useless. 
 
Our task this week was to explain what had happened and explore its implications. One question is whether anything is left. Another is the fate of the philanthropic movement—cult, almost—that inspired Mr Bankman-Fried. Effective altruism had already been going through turmoil, as some of its members sidelined saving today’s poor from ill-health for grand schemes that aspire to save the planet decades or hundreds of years hence. A third was to get into the head of Mr Bankman-Fried, who struck our Schumpeter columnist as surprisingly like Jack Welch, the late boss of GE.
 
Our cover in Asia featured the most important country that people routinely overlook. The last time Indonesia’s economy and politics were in the global spotlight was during the mayhem of the 1990s when a crony-capitalist system collapsed amid the Asian financial crisis, causing the fall of the 32-year dictatorship of Suharto.
 
A quarter of a century on, Indonesia matters once again. It was the venue for this week’s G20 summit.  It is the world’s largest Muslim-majority state, its third-biggest democracy and its fourth-most-populous country. With 276m people spread across thousands of islands that stretch from the Indian Ocean to the Pacific, it is caught up in the strategic contest between America and China. And like India and other emerging markets, it is adapting to a new world order in which globalisation and Western supremacy are in retreat. Perceptions often lag behind reality. We felt that it was time to catch up.

Zanny Minton Beddoes
Editor-in-chief

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The G20 summit in Bali concluded with a strongly worded statement condemning Russia’s invasion of Ukraine and demanding its immediate withdrawal. Russia managed to insert the phrase that there are “other views and different assessments of the situation” into the document. The Kremlin did, however, publish the statement in full, including the references to war and invasion. Sergei Lavrov, Russia’s foreign minister, attended the gathering, and criticised it for being too politicised.

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Regulators around the world opened investigations into FTX, after the crypto exchange and its sprawling network of affiliated firms filed for bankruptcy protection. Traders withdrew $6bn from the platform in just 72 hours amid claims that it had mishandled customers’ investments. FTX could owe money to as many as 1m people. Its spectacular collapse has prompted calls for tougher rules to regulate markets in digital assets. After it declared bankruptcy in America a hacker, possibly an insider, stole around $470m from the exchange.

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