Michael Lewis slammed for touting FTX's 'Ponzi scheme'

Michael Lewis slammed for touting FTX's 'Ponzi scheme'

Noted author Michael Lewis was buried beneath a Crypto Twitter pile-on after he highlighted FTX's ability to generate cash in an interview with CBS' 60 Minutes.

Lewis wanted to differentiate Sam Bankman-Fried's collapsed crypto empire from the renowned operations of other convicted fraudsters, such as Bernie Madoff.

Bankman-Fried's criminal trial began Tuesday, and FTX imploded last November. His case centers on seven fraud charges and conspiracy charges, which allege that FTX misappropriated billions of dollars in customer funds under his leadership.

Ponzi schemes pay investors money from new participants in cash, which is a type of Ponzi scheme. Although FTX became one of the biggest exchanges in crypto, federal prosecutors have called its history into question.

Bankman-Fried, who was charged with racketeering, said last December that his conduct could be traced back to 2019. The year FTX was founded was the year it began, and it is ahead of the exchange's lucrative expansion.

Consumer cash was commingled with assets at Alameda Research, a sister company to FTX, which covered its losses with customer funds. FTX's overall customer funds shortfall was $8 billion.

Months before FTX collapsed, CNBC reported the exchange's purported financial performance in 2021. The report said the exchange's revenue grew from just $89 million to just over $1 billion from just $89 million in the year before.

In November, FTX's bankruptcy case reflected a different picture. FTX and Alameda had accumulated $3.7 billion in operating losses by the end of 2021, according to a court filing.

Bankman-Fried 'boasted about FTX's profits' in late 2022, whereas the exchange finances 'contained a multi-billion-dollar deficiency' that stemmed from the misappropriation of funds.

However, Lewis said that FTX would'still be sitting there, making tons of money' if 'aspersions' were not cast on FTX's business that caused traders to withdraw their money en masse.

Dan Held, the leading crypto influencer, said it was'shameful' for Lewis to defend Bankman-Fried because exchanges 'are supposed to have 1:1 deposits' and can't handle deposits in the same way as banks-at least legally.

FTX has filed for bankruptcy, after a steep drop in the exchange's native token FTT resulted in a flurry of customer withdrawals. The exchange has been forced to admit that it did not hold segregated reserves of customer assets.

In an interview with the paper, Lewis said Bankman-Fried's business was a money maker. Lewis said that as a crypto exchange, it was the best business for crypto because of its ability to charge transaction fees.

Then, re sitting in the middle of those transactions and you're taking out a tiny fraction of a percentage, there's a lot of money to be made.