CME’s Terry Duffy says he saw the problem before FTX collapsed

CME Group CEO Terry Duffy reacts to FTX's collapse, which Sam Bankman-Fried calls 'an absolute fraud'

A senior exchange executive said he spotted red flags months before FTX’s historic crash.

CME Group Chairman and CEO Terry Duffy said he suspected corruption at a cryptocurrency exchange on the day of his first one-on-one meeting with founder Sam Bankman-Fred.

“I told my team this had nothing to do with cryptocurrency,” Duffy told CNBC’s “Fast Money” on Tuesday. “He wanted to list all asset classes, regal, intercontinental, CME and everyone else, under his model which would have been…a biblical disaster.”

The Bankman-Fried team did not immediately respond to a request for comment.

Duffy first recounted his encounter with Bankman-Fried last week on the “On the Tape” podcast, hosted by “Fast Money” dealers Jay Adami and Dan Nathan.

“You’re a fraud. You’re an absolute fraud,” Duffy told Bankman-Fried.

Now, Daffy gives more details about what happened before he met him.

Duffy wanted to know if the Commodity Futures Trading Commission was looking into Bankman-Fried’s request for regulatory relaxation to advance his trading model. He was told it was required under innovation guidelines.

“Immediately my suspicions were on the surface,” Duffy said. “Why is there so much pressure on this app? And then when I met him, I knew right away that this was a joke.”

However, Duffy said he wasn’t surprised that FTX has captivated so many high-profile investors and donors.

“When you have the greatest quarterback of all time and a supermodel wife doing a commercial who picks up the phone saying ‘Are you in, are you in, are you in.’ To me, it seems like a pump-and-dump scheme,” Duffy said. “People are deeply affected by people like Tom [Brady]. “

The FTX collapse is the largest cryptocurrency exchange bankruptcy ever. It is now in the early days of a bankruptcy hearing in Delaware. “What we’re dealing with is a different kind of animal,” said James Bromley, an FTX attorney hired by FTX’s new management.

Duffy added, “There will be a lot of sessions going on in the future. Let’s follow the money. Let’s see who knows what, when and where.”

The Senate Agriculture Committee plans to hold a hearing on the FTX explosion on December 1.

“I hope someone has the courage to ask,” Duffy said, “Was anyone putting pressure on the CFTC to move forward with an application that could have put everything in jeopardy?” “

Disclosure: The CME Group is the presenting sponsor of the “On The Tape” podcast.