Why Is Michael Lewis Rehabilitating Sam Bankman-Fried’s Image?

Sam Bankman-Fried, once a celebrity of the cryptocurrency market, is now on trial for fraud and money-laundering charges related to the collapse of his billion-dollar crypto exchange, FTX, and its associated firm, Alameda.

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The accusations, according to the New York Times (10/2/23), have made Bankman-Fried (aka SBF) emerge “as a symbol of the unrestrained hubris and shady deal-making” that have defined the cryptocurrency business. The trial will “offer a window into the Wild West–style financial engineering that fueled crypto’s growth,” which “lured millions of inexperienced investors, many of whom lost their savings when the market crashed.”

A year ago (FAIR.org, 11/19/22), I wrote that the business media, leading up to Bankman-Fried’s arrest, failed in their duty to scrutinize FTX and question what was going on behind its public relations. Far too often, he was lionized as a quirky visionary, a big-hearted man willing to funnel his profits into philanthropy and political progress. Bankman-Fried’s boy genius image collapsed with his arrest, but the business media’s credibility took a hit, too.

SBF’s chief defender

Today, acclaimed business writer Michael Lewis has stepped into the role of SBF’s chief defender. He interviewed Bankman-Fried over more than a year for his upcoming book on him, Going Infinite: The Rise and Fall of a New Tycoon (Wall Street Journal, 10/4/23), and he took to CBS’s 60 Minutes (10/1/22) to tell the world that the accused was simply misunderstood.

“This is not a Ponzi scheme,” he said of FTX, adding:

In this case, they had 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 making tons of money.

Lewis reiterated this point on MSNBC’s All In With Chris Hayes (10/3/23), saying the “alleged crime makes no sense.”

It is true that CoinDesk (11/2/22) obtained documents showing that

Bankman-Fried’s trading giant Alameda rests on a foundation largely made up of a coin that a sister company invented, not an independent asset like a fiat currency or another crypto.

And as the New Yorker (9/25/23) later put it, “The disclosure raised questions about the true value of Alameda’s holdings and about the conflict of interest between the two supposedly independent companies.” This revelation led to doubts about and then a run on the exchange (CoinDesk, 11/10/22; New York Times, 11/14/22).

In essence, Lewis is upset that some parts of the business press and the cryptocurrency investing community were too probing of FTX and Alameda, despite the fact that no one disputes CoinDesk’s findings. As CoinDesk even noted, the exchange’s quick demise spoke to the risks involved in new markets with scant regulation:

The immense scope of this black swan-style event serves as a key reminder of just how rapidly confidence can erode in the parallel financial universe of digital assets—where there are no central banks to bail out the key players—as happened in 2008 when nearly all of Wall Street ran short of liquidity and had to turn to the Federal Reserve for emergency funding.

‘Misappropriating billions’

And even if Lewis genuinely believes the CoinDesk exposure or other players’ doubts about FTX unfairly caused an asset run, that still doesn’t negate the serious criminal activity being alleged. For starters, a Department of Justice press release (12/13/22) states that SBF

perpetrated a scheme to defraud customers of FTX by misappropriating billions of dollars of those customers’ funds.  As alleged, the defendant used billions of dollars of FTX customer funds for his personal use, to make investments and millions of dollars of political contributions to federal political candidates and committees, and to repay billions of dollars in loans owed by Alameda Research, a cryptocurrency hedge fund also founded by the defendant.

The federal government also accuses Bankman-Fried of “conspiring with others to defraud FTX’s lenders ‘by providing false and misleading information to those lenders regarding Alameda Research’s financial condition,’” and alleges that “he conspired with others to make illegal donations to political candidates, using the names of other persons to mask and augment political giving” (CNBC, 12/13/22). The prosecution claims that his wealth and power—highly lauded and accepted at face value in the establishment press until the moment of his collapse—was “built on lies” (Reuters, 10/4/23).

Like anyone, Bankman-Fried is innocent until proven guilty, and has the right to defend himself in court. And it is, of course, an open question if what SBF is accused of engaging in was a Ponzi scheme or mere fraud (Guardian, 12/17/22). In fact, CoinDesk (11/16/23) likens the FTX downfall not necessarily to a Ponzi schemer like Bernie Madoff, but to the shady energy company Enron: “One core similarity is the role of publicly traded, equity-like assets ultimately linked to the performance of the firms themselves,” it wrote; in “both cases, these internal assets flowed between entities that were nominally or even legally separate, but that in fact served the same masters.”

But it’s remarkable for an esteemed business journalist to use one of the country’s most important news programs to declare that everyone except SBF was to blame for a business collapse that had enormous consequences for everyone involved. It’s even weirder to hear a business writer insinuate that critical reporting and asking key questions about the health of a business constituted casting “aspersions.”

‘Effective altruism’

More bizarrely, Lewis went on to say that the world is poorer without SBF at the helm of a cryptocurrency exchange. “A lot of people wanted there to be a Sam,” he said. “There is still a Sam Bankman-Fried–shaped hole in the world that now needs filling. That character would be very useful…. What he wanted to do with the resources.”

One can only imagine that Lewis means SBF’s commitment to “effective altruism” (Vox, 12/12/22), a philosophy that often advocates amassing as much money as possible in order to have more to give away. But Lewis’ declaration here displays the narrow vision the business press has for the world: Society doesn’t need a massive market for internet-based currency, and surely no one needs to profit off such exchanges. Nor can social problems only be addressed by bleeding-heart rich people.

There is a hole in society. But it isn’t another crypto capitalist we need, but a system that taxes the wealthy to fund social programs and to curb the influence of money in our political system. Lewis’ desire for a new SBF is as much a political statement as it is commentary on SBF’s case.

And Lewis’ political naivete came on full display when he told 60 Minutes that SBF came up with an idea to pay Donald Trump not to run for president, an idea that would no doubt delight many liberals. However, putting aside the question of how much Trump ever entertained such a buy-off, the sleazy scheme would likely have no meaningful impact on our politics today. Whether Trump gets the nomination this year or not doesn’t change the fact that his ideas have become firmly rooted in the Republican Party, and living on in the policies of Republican governors around the country.

One has to wonder if SBF’s openness with Lewis inspired Lewis to cross the line into a guest of his source, compromising his vision. Andy Kessler wrote at the Wall Street Journal (10/1/23) that “Lewis spent more than 70 days in the Bahamas” with SBF, where FTX was based, “on a dozen different trips.” “That’s commitment,” Kessler wrote, noting that “Lewis had all access.”

Lewis told the Journal that in his many discussions with SBF, under house confinement at his parents’ home in Palo Alto, California (Lewis lives nearby in the East Bay),  “nothing he said was untrue.” He added, “If you asked him the right question, you got the answer.”

Judging from both this and the 60 Minutes appearance, Lewis is looking at the FTX and Alameda collapse not with a cold outside eye, but the view of an insider, by SBF’s side.

‘Too much in love with his subjects’

Lewis, a prolific author and a contributor at Vanity Fair, is far from just another business journalist. He is a rare kind of successful writer who can turn business reporting into drama, which has made him rich both via book sales (starting with Liar’s Poker in 1989) and movie deals (The Blind Side, Moneyball, The Big Short).

While his narratives about business and other spheres of life are popular around the world, some wonder if he’s on the other side of career peak. As long ago as 2015, Columbia Journalism Review (1/15) was noting he had been lambasted by critics  for “journalistic laziness” and “falling much too in love with his subjects.” The Washington Post (5/5/21) called his pandemic account The Premonition “disappointing” and “murky and unconvincing.”

Then his book The Blind Side, about the adoption of future African-American football star Michael Oher by a wealthy white family, became the subject of a scandal all its own (People, 8/17/23), when Oher revealed that he was never actually adopted, and charged that the idea that he had been was “a lie concocted by the family to enrich itself at his expense” (ESPN, 8/14/23).

Personal tragedy also struck: Lewis told 60 Minutes (10/1/23) that he almost stopped writing after his daughter, along with her boyfriend, was killed in a car accident (AP, 5/29/21).

Lewis’ appearance on 60 Minutes is an extension of the press enthusiasm for SBF that FAIR documented before the fall of FTX. Lewis is entranced at SBF’s friendships with celebrities, his charismatic shabbiness, his lofty ambitions, and his obsession with news and information. All that creates an image of an adorable whiz kid rocking the stodgy world of Wall Street. But it really is the media’s job to look behind that and see him for who he really is: a competent adult who ran a business accused of serious wrongdoing.

But worst of all, Lewis’ praise for Bankman-Fried is the kind of business advocacy that not only takes the boss’ defense at face value, but doesn’t have any kind of empathy or interest in the victims of FTX’s collapse (Atlantic, 1/30/23; Fortune, 10/1/23). Skeptics of cryptocurrency often disregard cryptocurrency investors as dupes or small-time scammers. On 60 Minutes, Lewis dismissed the ethical implications of Bankman-Fried’s machinations: “What you’re doing is possibly losing some money that belonged to crypto speculators in the Bahamas.”

However, many people are attracted to cryptocurrency investing for the same reason people invest in other risky ventures that promise great reward: Wages are not keeping up with the cost of living, and thus people are desperate to find other ways to attain financial security (Business Insider, 1/12/20). Though some people come to crypto exchanges because they want a Lamborghini, others just want to create a nest egg for retirement, start a college fund or pay off their mortgage.

Whether it’s the subprime crisis of 2008 or the savings and loan crisis of the 1980s, all financial collapses create victims, very real people whose lives are upended by greedy financial barons. We should be hearing more about the victims of financial collapse on venues like 60 Minutes.