Former Kynikos executive slams Michael Lewis for parroting language

Former Kynikos executive slams Michael Lewis for parroting language

Chanos slammed Lewis for parroting language and said the loss of FTX to a bank run.

On October 1st, author Michael Lewis received criticism from social media after an interview with 60 Minutes on CBS about FTX founder Sam Bankman-Fried that was widely decried as unjustifiably credulous.

The chief executive of Kynikos Associates was Jim Chanos, founder of Kynikos Associates, who has a long and storied history betting against notorious financial frauds such as Enron and Bankrupt German payments giant Wirecard.

Chanos slammed Lewis for parroting language in a post on X, the social-media platform formerly known as Twitter, attributing the fall of FTX to a bank run.

We would have been fine for those meddling short-sellers and journalists causing a run-on-the-bank, he said. This is nonsense, as both FTX and Enron were both massively insolvent, not illiquid, said Chanos, who has long been associated with the @WallStCynic handle on X.

Shortly after the group of companies filed for bankruptcy protection in November, Bankman-Fried blamed the collapse of his crypto empire on a run on customer deposits.

While FTX's fate was partly secured by a $6.8bn cash flow from customer deposits, a presentation filed in March as part of the bankruptcy court process revealed Bankman-Fried's former empire had a massive $6.8bn hole in the balance sheets of its associated companies.

The appreciation in cryptocurrency prices this year has boosted the value of some of these assets, according to court filings made by the company's attorney.

Bankman-Fried faces charges of wire fraud, securities fraud and money laundering.

CBS aired the 60 Minutes interview with Lewis, author of bestselling books Liar's Poker, The Big Short, Moneyball and The Blind Side, on October 1, where Lewis shared tidbits from his book about FTX and Bankman-Fried. The creator was accused of defending the erstwhile cryptowunderkind.

Some others, such as Chanos, pointed out that the firm was not just illiquid, but insolvent.

A crucial difference between an illiquid and an insolvent company is that an illiquid company has high-quality assets that it can either sell or use as collateral for loans, while an insolvent firm does not.