If you haven’t been living under a rock, you probably know that acclaimed financial storyteller Michael Lewis has released a new book. The book delves into the rise and fall of Sam Bankman-Fried, the founder of crypto exchange FTX and the alleged fraudster. The internet has been buzzing with controversy surrounding Lewis and his book. However, it was a clip from an interview on CBS’s 60 Minutes that truly got people fired up. I was one of those people.
In the video, Lewis tells host Jon Wertheim that the collapse of FTX was not a Ponzi scheme and praises the exchange as a “great, real business.” I find Lewis’s perspective to be extremely flawed. Even if we assume FTX’s failure was unintentional, calling a crypto exchange that lost $8 billion of customers’ money a “great business” is a dubious and illogical assessment. Let’s not forget that FTX only had 10% of its liabilities in liquid assets on the day before it went bankrupt. This was a clear violation of regulations since FTX was not a bank.
Many have criticized Lewis for his sympathetic portrayal of SBF in the book. Some argue that the interview reflected the book’s narrative, though it doesn’t fully glorify SBF. Lewis reiterated his stance on his podcast, Against the Rules with Michael Lewis, stating, “I thought how curious it was, the speed [FTX] went from [being] this pretty widely admired and reputable operation to being viewed as this vast criminal enterprise, without there being a whole lot of new data — except for the fact the money was in the wrong place.”
What truly perplexes me is how anyone could have blindly supported FTX and the entire crypto narrative. According to Lewis, he believes the crypto version of the financial system is better than the existing system. But how did we end up here? Crypto is not merely a zero-sum game; its inherent moral flaws make it a negative-sum game. Considering crypto businesses like FTX to be an improvement on the current financial system only makes sense if we value the system based solely on the amount of money extracted by those at the top.
This perspective reflects a deep nihilism towards the role of financial markets, overlooking crucial functions like price discovery and facilitating the supply and demand of commodities needed for a functioning economy. Martin Walker, director of banking and finance at the Center of Evidence-Based Management, traces this viewpoint back to the 1990s when the dogma of “the free market is always right” emerged and eventually transformed into “the financial system is always right.”
It’s not surprising that Lewis, who has spent his career uncovering financial misconduct, has become cynical about the value of the system he reports on. The financial world often resembles a casino, and so-called “financial innovation” like crypto is often a game of exploiting regulatory gaps until regulators catch up.
Bankman-Fried, who experienced the global financial crisis at the age of 15, epitomizes this financial nihilism where nothing truly matters. Crypto itself emerged from this perspective. The crypto world embraces a Monopoly-like atmosphere where meme coins can reach enormous market caps of nearly $90 billion and digital artwork can sell for millions. In this artificial Monopoly world, money is nothing more than numbers on a screen. So, does it even matter if there was no $8 billion in FTX? There was never any real substance in crypto to begin with.
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