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Somehow, Author Michael Lewis Has Fallen For SBF’s Unkempt, Well-Meaning Genius Gimmick That Beguiled Most Of DC And The Media. He’s Held On To This Idea Almost A Year Since Bankman-Fried Was Exposed.
This article first appeared in our weekly Hack Watch newsletter on media accountability. Subscribe here to get it delivered straight to your inbox every week, and check out our Hack Watch website.
Last November, Sam Bankman-Fried’s empire, built on crypto and fraud, collapsed around him, leaving a million or more FTX users without access to their accounts, unsure what, if any, of their assets they’d see again. The silver lining of the incident was supposed to be that the idea that the young, slovenly dressed, disengaged, and unprofessional tech CEO archetype who was a genius visionary had finally been put to bed. But this week, author Michael Lewis, famous for publishing The Blind Side, The Big Short, and Moneyball, revealed that he was, somehow, the most gullible man alive.
On a big press tour for his latest book – focused on none other than Sam Bankman-Fried (SBF)– Lewis has spent the past week throwing out patently absurd defenses of the FTX founder to any reporter willing to listen. Lewis’ defenses include pretending SBF was just a child (he’s 31 years old, two years older than Joe Biden when he was elected to the US Senate) insinuating vague conspiracies that “the alleged crime kinda makes no sense,” and pushing SBF’s stale PR that he was trying to do everything in his power to stop Donald Trump (FTX leaders, including SBF, donated almost $24 million to Republicans in 2022 alone). Most comical of them all, however, is Lewis’ insistence that Bankman–Fried’s scheme was nothing like the fraud of famous Ponzi schemer Bernie Madoff.
Lewis uses two arguments to differentiate the crimes of Bankman-Fried from Madoff: that SBF’s crimes would never have been an issue were it not for a loss of consumer confidence and that SBF operated a profitable business separate from the one which he used to commit his crimes. Lewis is, of course, being astoundingly stupid here.
The very essence of a Ponzi scheme is the confidence built with consumers. The entire system is predicated on money coming in but not leaving, allowing customers to believe their assets are growing because on paper they are. Meanwhile, the fraudster is siphoning away most of their assets. The scheme is able to function so long as the vast majority of its victims keep their funds deposited. The moment their confidence falters, the entire scheme falls apart as the criminal is unable to pay out all of his customers. This is why the Madoff scheme, which lasted over 20 years, finally collapsed under the falling consumer confidence of the Great Recession. It is also why SBF’s fraud with FTX is so clearly a Ponzi scheme; it was the rapid withdrawal of customer funds that revealed his firm had spent much of their money. FTX was supposed to be a simple crypto trading website that made money by charging transaction fees. The fact that the company was missing any of its customers’ reserves is clear-cut evidence of fraud.
But it is Lewis’ second point that belies his basic unfamiliarity with financial crime. Lewis insists that what differentiates Bankman-Fried from a common criminal like Madoff is his profitable “legitimate” business, FTX. In Lewis’ eyes, there is no reason why someone with a profitable business—Lewis cites FTX as having $1 billion in annual profit, a number FTX executive Nishad Singh pled guilty to falsifying under SBF’s orders—would commit financial crimes with another. But that is exactly what Bernie Madoff did. Just like how SBF was not known for Alameda Research, his cryptocurrency investment firm, Madoff was not known on Wall Street for his money management, but for his very successful business as a “Market Maker,” at one point processing up to 15% of all trades made at the New York Stock Exchange. It was this business that furnished Madoff with the reputation and the legitimacy to continue his crime, just like FTX did for SBF.
Lewis’ tour wasn’t all focused on defending Bankman-Fraud, he also made time to imply that The Blind Side subject Michael Oher must be suffering from brain damage. Because why else would a grown man want to free himself from legal conservatorship?
[Note that the Judge in Oher’s case against Lewis’ friends noted that his conservatorship was approved “`despite the fact that he was over 18 years old and had no diagnosed physical or psychological disabilities’” and that “she was disturbed that such an agreement was ever reached […] she had never seen in her 43-year career a conservatorship agreement reached with someone who was not disabled. `I cannot believe it got done.’”]
Why Lewis has decided to mount a full-throated defense of perhaps the clearest fraudster since Theranos’s Elizabeth Holmes, we have no idea (was it brain damage?), but journalists need to point out his inconsistencies and falsehoods. The media cannot promote Lewis’ without a proper fact check. They must be prepared to rebut his fabrications, push back on his hero worship of SBF, and ensure that the audience understands what Lewis is unable to comprehend: Sam Bankman-Fried is no more than a fraud and a white-collar criminal. Not only did the vaunted 60 Minutes fail to do so in their interview with Lewis, but so did Chris Hayes, who is normally as sound a cable news host as can be found. Lewis is selling a story and a book; the media cannot allow itself to simply become an infomercial for his fraud-revisionism.