Michael Lewis slammed for touting FTX's ability to generate cash

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Michael Lewis slammed for touting FTX's ability to generate cash

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

In the broadcast, Lewis sought to distinguish the collapsed crypto empire of Sam Bankman-Fried from the renowned operations of other convicted fraudsters, such as Bernie Madoff.

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

Ponzi schemes employ nonexisting companies where investors are paid out in cash from new participants. Although FTX became a major exchange in crypto, federal prosecutors have called its long-lived legacy into question.

When the charges against Bankman-Fried were brought against him in December, prosecutors said that his conduct could be traced back to 2019. FTX was established in the year that FTX was founded, and it's a crucial factor in the exchange's lucrative expansion.

Prosecutors said customer cash was commingled with assets at Alameda Research, a sister company to FTX, that covered its losses with customer funds. FTX's shortfall in customer funds was $8 billion.

months before FTX collapsed, CNBC reported the market's purported financial performance in 2021. The news release notes that the exchange's revenue grew to just over $1 billion from just $89 million in the year before.

In November, FTX's bankruptcy actions painted a different picture. By 2021, FTX and Alameda had accumulated $3.7 billion in operating losses for federal tax purposes, according to a court filing.

Bankman-Fried alleged in a new indictment, that FTX's profits were 'boasted in late 2022, while the exchange finances had a multi-billion-dollar deficiency that stemmed from the misappropriation of funds.

Lewis said at the end of the day that FTX would still be sitting there, making tons of money if 'aspersions' didn't cast on FTX's business that caused traders to withdraw their money en masse.

Dan Held, the most prominent 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.

The steep drop in FTT in the exchange's native token, FTX, triggered a plethora of customer withdrawals, causing FTX to file for bankruptcy. It forced the exchange to admit that it did not hold segregated reserves of customer assets.

Lewis, however, said Bankman-Fried's business was a money maker. Lewis said Cryptocurrency is the 'best business' in crypto because of its ability to charge transaction fees.

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