The Michael Lewis book, Going Infinite, centers on the rise and fall of Sam Bankman-Fried and the failed FTX crypto exchange. It has been panned for its fawning portrayal of a “cute and quirky” genius who was just misunderstood, while presenting a deeply biased account of events.
Framework Ventures co-founder Michael Anderson adds to the criticism, arguing that the author’s skewed version of reality just doesn’t seem to add up.
On the Bell Curve podcast (Spotify/Apple), Anderson says the book contains elements that create a “glaringly incorrect representation of the facts.” For one, he says that the author describes the failure of the FTX exchange as a “bank run.”
“There can only be a bank run if you have under-collateralization in a system, because you don’t have all the money available to be able to pay people back,” he explains. “It was pretty clear that there was rotation from assets that they didn’t like into assets that they did like,” he says.
An exchange should consistently have sufficient value to back up all deposits, Anderson explains, “especially if you have a highly profitable business.”
“That’s how exchanges work,” he says. “That’s not how banks work.”
To protect against a bank run, banks must hold certain quantities of cash and Treasurys to ensure liquidity and to be able to backstop loans and balance sheets, Anderson explains. “That’s the business model of a bank,” he says. “A bank run is not possible with a one to one backed exchange, period. End of story.”
Read more from our opinion section: New Sam Bankman-Fried book ‘Going Infinite’ goes absolutely nowhere
Almost too perfectly incorrect
Another inaccuracy that the book suggests, Framework Ventures co-founder Vance Spencer adds, is the notion that the exchange was profitable prior to the meltdown.
“People only wanted to trade on FTX because you could trade against Alameda,” he explains. According to Spencer, FTX users were able to trade “shitcoin perps they launched and then subsequently destroyed. They were the initial liquidity providers for that.”
Spencer describes initial exchange offerings that caused major losses for the company. “They bought all of those tokens and then proceeded to seed the perp and trade against people — and that was why you traded there.”
“You could trade against Alameda,” he continues, “and Alameda was so bad at trading that they had to steal customer deposits to backfill the shortages.”
“Like, ipso facto, this was not a profitable business. It was just margin that was being internalized and then lost by Alameda.”
“I think, you know, he’s just frankly gotten this one completely wrong,” Spencer says.
“He may understand how to sell books,” he says, “but I don’t think he understands the culture around the things that he’s writing about.”
What struck Ippolito about the book’s inaccuracies is not that the writer “got it a little bit wrong,” he says, but that “he got it a hundred percent, 180 degrees wrong.”
Ippolito explains that the book describes FTX as a sort of “profitable casino” that ultimately failed because of Alameda’s shortcomings. FTX “was never real,” Ippolito says, “but Alameda was the vehicle that he was using to siphon all of the wealth out of FTX.”
“It’s just so incorrect,” he says. “It’s almost too perfectly incorrect, if that makes sense.”
Spencer wonders, “who knows what Michael Lewis was fed, where his primary sources of information were, how much SBF was just bullshitting and making up as he went along?”
“I don’t know. I just think it’s so sad.”
