Michael Lewis Was Charmed by Sam Bankman-Fried – But So Was Everyone Else

Many crypto insiders hate Sam Bankman-Fried. Now, they have turned their wrath on the author Michael Lewis, who on 60 minutes referred to FTX as “a great real business.”

“If no one had ever cast aspersions on the business, if there hadn’t been a run on customer deposits, they’d still be sitting there making tons of money,” Lewis continued, sparking an uproar on crypto Twitter. Because even if the former FTX CEO didn’t have malicious intent, he’s still associated with the disappearance of billions of dollars and regulators’ growing disdain of crypto. So why does Lewis appear to be on his side?

Emily Parker is CoinDesk’s executive director of global content.

This question wouldn’t matter so much if Lewis’s book, “Going Infinite,” hadn’t come out on the first day of Bankman-Fried’s trial, and if Lewis himself hadn’t described his book as “a letter to the jury.” And even if Lewis doesn’t convince the jury, his fame and accessible writing style could certainly sway mainstream public opinion.

To be fair, Lewis’s book is more nuanced than his media sound bites. He does not paint a particularly flattering picture of either FTX or its sister company Alameda Research, which was allegedly gambling away FTX customers’ money. “It was never clear where Alameda Research stopped and FTX started,” Lewis writes. He refers to a document that describes how “more than $10 billion that was meant to be custodied by FTX somehow had ended up inside Sam’s private trading fund.”

But the bigger question is: Why did this all happen? Overall, Lewis does seem to view Sam as an agent of chaos rather than someone with criminal intent, which is essentially what Sam’s defense is saying. The basic argument is that billions of dollars is a lot of money and it can be quite tedious to keep track of it all. Sam was messy, inconsiderate and a nightmare of a manager, Lewis seems to believe, but not a thief. (For some counterarguments, see David Z. Morris’ scathing CoinDesk article, “FTX’s Collapse Was a Crime, not an Accident.”)

Nor does Lewis portray Sam as a particularly nice guy. Despite his commitment to “effective altruism,” he seems to have little to no empathy for other human beings. But, Lewis says, “with him it was never personal. If he stood you up, it was never on a whim, or the result of thoughtlessness. It was because he’d done some math in his head that proved that you weren’t worth the time.”

In another passage, Lewis describes how one of Sam’s colleagues rationalized his behavior: “She could never be upset with him for the mess he left for her to clean up, because she knew that he never intended to make a mess.” In other words, Sam might have caused a lot of damage, but it wasn’t on purpose. Lewis even goes as far to say, “he set out to establish FTX as the world’s most regulated, most law-abiding, most rule-following crypto exchange.” We all know how that turned out.

Much of the research for the book was written before the fall of FTX and the revelations that followed it, which means that some observations did not age well. “His mom and dad were law professors at Stanford who had basically zero interest in money and were bewildered by what had become of their son,” Lewis hears from Sam. The world has since learned that Sam’s father wanted to earn a $1 million salary from FTX, and enlisted his wife to help with this cause.

CZ contrast

The book’s relatively sympathetic treatment of Sam becomes more striking in contrast to depictions of his adversaries, such as Binance CEO Changpeng Zhao. Before the book was published, a letter from Creative Artists Agency circulating in Hollywood said Lewis likened Sam and CZ “to the Luke Skywalker and Darth Vader of crypto.” Traces of this characterization still made it into the finished book. “Binance was the class bully, FTX the class nerd, and each took pleasure in using its special powers to torment the other,” Lewis wrote. He also said, “Sam thought about the size of the pie, while CZ cared more about the size of his piece.” There’s also some gratuitous shade, such as, “If CZ ever had an original thought he never expressed it.”

Another extremely unfavorable portrayal is of John J. Ray III, the restructuring lawyer who took over FTX after Sam resigned, and who famously said he had never seen “such an utter failure of corporate controls at every level of an organization.” Lewis portrays Ray as stubborn and clueless.

Then there is Lewis’s narrative of FTX’s precipitous downfall, and in particular of the role of CoinDesk, the company where I work. On November 2, 2022, CoinDesk published an article showing that Alameda’s balance sheet was largely made up of FTT, a token Sam minted out of thin air. This raised questions not only about Alameda’s viability, but also about its relationship with FTX. CZ then tweeted that Binance was liquidating its FTT. Not long after that, FTX was finished.

My colleague Ian Allison’s article is widely credited with sparking FTX’s collapse and has won several major awards. But it is not loyalty to CoinDesk that makes me think that Lewis plays down the article’s revelation in a rather curious way. He waves it off with “in and of itself the article struck people inside of FTX as of no more than prurient interest.” Despite the huge amount of attention the article got at the time, the book only cites one sole reaction: another crypto journalist’s snarky “congratulations on knowing something we knew two years ago.” In a footnote, no less. The larger issue is that Lewis portrays the Alameda balance sheet as a relatively trivial matter that was already known. But it wasn’t. The balance sheet was a big deal, and for good reason. It was the first time any serious doubt was cast on FTX’s once untouchable empire.

Lewis fully admits that he initially fell for Sam’s charms. He even told a friend something like, “Go for it! Swap shares with Sam Bankman-Fried! Do whatever he wants to do!” But really, can you blame him? Sam had pretty much everyone under his spell. Celebrities. Politicians. Venture capitalists. Even the fashion industry. FTX’s marketing crew apparently sounded out Louis Vuitton about “creating a red-carpet worthy version of Sam’s T-shirt and cargo shorts look.” And while much of the crypto world reviles Sam now, there were almost no dissenting voices when FTX was flying high.

The bottom line is that one company should never have had so much power, especially in an industry that is supposed to be about decentralization. The industry’s fury at Sam might seem like progress, but I’m not sure that it is. This is not just a “bad apple” problem. If crypto was working as it should, one person would never have been able to do this much damage.

Therein lies one of the sharpest insights in Lewis’s book. Blockchain technology is supposed to remove the intermediary and thus the need for trusting human beings. Instead, too many people put an absurd amount of trust in Sam’s ability to lead an opaque web of companies and later to be the savior of a troubled industry. The crypto world is still reeling from the consequences.

As Lewis writes, “In crypto finance, founded on a principle of mistrust, people trusted total strangers with vast sums of money.”