Michael Lewis Claims FTX Was a ‘Nice Actual Enterprise’

Famous writer Michael Lewis was buried below a Crypto Twitter pile-on after he highlighted FTX’s capacity to generate money in an interview with CBS’ 60 Minutes.

Through the broadcast, Lewis sought to differentiate Sam Bankman-Fried’s collapsed crypto empire from the notorious operations of different convicted fraudsters, equivalent to Bernie Madoff. 

“This isn’t a Ponzi scheme,” Lewis mentioned. “The issue is, there’s no actual enterprise there. On this case, they really had a fantastic actual enterprise.”

FTX imploded final November, and Bankman-Fried’s felony trial begins tomorrow. His high-profile case facilities on seven fraud and conspiracy fees, which allege that FTX misappropriated billions of {dollars} in buyer funds below his management.

Ponzi schemes contain nonexistent enterprises the place buyers are paid out in money that comes from new contributors. Although FTX grew to become considered one of crypto’s largest exchanges, federal prosecutors have referred to as its short-lived legacy into query. 

When felony fees had been introduced towards Bankman-Fried final December, prosecutors mentioned that his misconduct might be traced again to 2019. That was the yr FTX was based, and it precedes the trade’s profitable progress.

Buyer money was commingled with belongings at Alameda Analysis, a sister firm to FTX that coated its losses with buyer funds, prosecutors allege. In complete, FTX’s shortfall of buyer funds was $8 billion.

Months earlier than FTX fell aside, CNBC reported the trade’s purported monetary efficiency in 2021. Citing inner paperwork, the publication mentioned the trade’s income grew to only over $1 billion from simply $89 million the yr earlier than.

FTX’s chapter proceedings in November painted a special image. By the top of 2021, FTX and Alameda had collected $3.7 billion in working losses for federal tax functions, based on a courtroom submitting.

As prosecutors alleged in a brand new indictment, Bankman-Fried “boasted about FTX’s income” in late 2022, whereas the trade funds “contained a multi-billion-dollar deficiency” that stemmed from the misappropriation of funds.

However on the finish of the day, Lewis mentioned that FTX would “nonetheless be sitting there, making tons of cash” if “aspersions” weren’t forged on FTX’s enterprise that brought on merchants to withdraw their cash en masse.

Distinguished crypto influencer Dan Held mentioned it was “shameful” for Lewis to defend Bankman-Fried as a result of exchanges “are presupposed to have 1:1 deposits” and may’t deal with deposits in the identical method as banks—no less than legally.

FTX filed for chapter after a steep drop within the trade’s native token FTT sparked a flurry of buyer withdrawals. It compelled the trade to confess that it didn’t maintain segregated reserves of buyer belongings.

Nonetheless, Lewis mentioned that Bankman-Fried’s enterprise was a cash maker. As an trade, Lewis mentioned it was the “greatest enterprise” in crypto due to its capacity to cost transaction charges.

“Should you’re sitting in the midst of these transactions and you take out even a tiny fraction of a proportion level, there’s some huge cash to be made.” “So long as individuals are buying and selling crypto, it made cash.”