July 21, 2024
Michael Lewis Defends FTX Amid Controversy: Is It a Ponzi Scheme or a Legitimate Business?
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Michael Lewis Defends FTX Amid Controversy: Is It a Ponzi Scheme or a Legitimate Business?

After he highlighted FTX’s capacity for revenue generation in an appearance with CBS’s 60 Minutes, renowned author Michael Lewis was buried in a crypto Twitter pile-on.

Lewis aimed to separate Sam Bankman-Fried’s dismantled crypto business from the notorious enterprises of other guilty fraudsters, like Bernie Madoff, throughout the program.

“This isn’t a Ponzi scheme,” Lewis stated. “The problem is, there’s no real business there. In this case, they had great real business.”

FTX collapsed in November of last year, and Bankman-Fried’s criminal trial will start on Monday. Seven fraud and conspiracy accusations at the focus of his high-profile case say that FTX misused billions of dollars in client assets while he was its CEO.

Ponzi schemes are fictitious businesses where investors are compensated with money from additional members. Federal prosecutors have questioned FTX’s short-lived legacy, although it rose to become one of the biggest cryptocurrency exchanges.

Bankman-Fried was charged with a crime in December, and the prosecution claimed that his misbehaviour began in 2019. FTX was established in that year, which came before the exchange’s prosperous expansion.

Prosecutors claim that Alameda Research, a subsidiary firm of FTX that used client money to offset its losses, mixed consumer cash with assets. Total client monies missing from FTX were $8 billion.

CNBC reported on the exchange’s alleged 2021 financial results months before FTX collapsed. The magazine used internal records to claim that the exchange’s income increased from about $89 million the previous year to well over $1 billion.

In November, FTX filed for bankruptcy, which projected a different picture. According to a court document, FTX and Alameda had accrued $3.7 billion in operational losses for federal taxation by the end of 2021.

In a fresh charge, prosecutors said that Bankman-Fried “boasted about FTX’s profits” in late 2022, although the exchange’s accounts “contained a multi-billion-dollar deficiency” brought on by money laundering.

Lewis asserted that FTX would “still be sitting there, making tons of money” if “aspersions” weren’t thrown at the company’s operations that led traders to systematically withdraw their funds.

Dan Held, a well-known crypto influencer, called Lewis’ defence of Bankman-Fried “shameful” because exchanges “are supposed to have 1:1 deposits” and aren’t able to manage deposits in the same manner as banks lawfully.

After a sharp decline in the exchange’s native token, FTT prompted a wave of client withdrawals, and FTX declared bankruptcy. The exchange was compelled to acknowledge that it lacked segregated reserves of customer assets as a result.

Lewis nonetheless asserted that Bankman-Fried’s enterprise was profitable. Lewis said that as an exchange, it was the “best business” in cryptocurrency due to its capacity to impose transaction fees.

“If you’re sitting in the middle of those transactions and you’re taking out even a tiny fraction of a percentage point, there’s a lot of money to be made.” “As long as people are trading crypto, it makes money,” Lewis concluded.

Image: Flickr

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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