The Case That Foreshadowed the Lessons of the FTX Collapse

For the past three years, the 30-year-old boy wonder Sam Bankman-Fried, or SBF, had been crowned the "King of Crypto". He built a $32 billion empire using his quant and coding skills instead of a bow and arrow. It was all for the cause of giving to the poor, with a stunning roster of A-listers, including top Democrats and star sportspersons. Since being taken out of his Caribbean home in handcuffs on December 12 he has appeared less cheerful.

Robin Hood, who agreed to be extradited to the US earlier this week, ended up in chains.

A little over a decade ago, there was a man named Vikram Akula who was experimenting with his own philanthropic fantasy on the other side of the world. Poor women in rural areas often don't have access to credit from conventional banks, so institutions that give small loans to them is called microcredit. The Grameen Bank, the first of its kind in the world, was established in Bangladesh in the 1970s and has grown to boast millions of borrowers around the world.

By speeding the process up, Akula wanted to bring the logic of fast to India, where he was born and raised. In 1997 he established his own company, and within a year it was one of the fastest growing institutions in the sector. The SKS IPO was 14- times oversubscribed by the end of the year.

There are similarities between FTX and SKS. Robin Hood and his followers had a noble cat-and-mouse game with the Sheriff, and both men worked in the fringes of the law. Akula had an arrest warrant issued against him in 2010 but he was never arrested.

There were a lot of similarities between the original models ofcryptocurrencies and micro finance. It is a digital currency that can be traded on a number of exchanges, as well as some broker platforms. Unlike conventional "fiat currencies" issued by governments, it isn't backed by any physical assets. The ultimate peoples' ledger is considered open, diffuse, and consensus driven because transactions are verified and recorded in a continuous link.

The Microfinance model is notable for providing loans without either contracts or collateral, but instead through group lending or organizing borrowers into supportive peer groups, usually of five. The high repayment rates are achieved by means of consensus or common consent among borrowers, despite the absence of the usual punishing mechanisms. Peer-to-peer relationships are similar to Robin Hood's commitment to redistribution as financial justice.