{"id":68195,"date":"2023-10-03T09:34:55","date_gmt":"2023-10-03T13:34:55","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/short-seller-jim-chanos-slams-michael-lewis-for-defending-ftx-says-crypto-empire-was-massively-insolvent-just-like-enron\/"},"modified":"2023-10-03T09:34:58","modified_gmt":"2023-10-03T13:34:58","slug":"short-seller-jim-chanos-slams-michael-lewis-for-defending-ftx-says-crypto-empire-was-massively-insolvent-just-like-enron","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=68195","title":{"rendered":"Short seller Jim Chanos slams Michael Lewis for defending FTX, says crypto empire was \u2018massively insolvent\u2019 just like Enron"},"content":{"rendered":"
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Author Michael Lewis faced criticism on social media Sunday evening following an interview with \u201c60 Minutes\u201d about FTX founder Sam Bankman-Fried that was widely decried as unjustifiably credulous. <\/p>\n

Among the critics was short seller Jim Chanos, founder of Kynikos Associates, who has a long and storied history betting against notorious financial frauds, including Enron and bankrupt German payments giant Wirecard. In a post on X, the social-media platform formerly known as Twitter, Chanos slammed Lewis for parroting language attributing the fall of FTX to a bank run. <\/p>\n

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\u201cThis was literally Enron\u2019s defense. \u2018If it wasn\u2019t for those meddling short-sellers and journalists causing a run-on-the-bank, we would\u2019ve been fine.\u2019 This is nonsense, as both FTX and Enron were both massively insolvent, not illiquid,\u201d said Chanos, who has long been associated with the @WallStCynic handle on X.<\/a><\/p>\n

Bankman-Fried first blamed the collapse of his crypto empire on a run on customer deposits shortly after the group of companies filed for bankruptcy protection in November following a spectacular and sudden unraveling.<\/p>\n

While FTX\u2019s fate was partly sealed by a $6 billion run from customer deposits, a presentation filed in March as part of the bankruptcy court process showed Bankman-Fried\u2019s former empire had a massive $6.8 billion hole in the balance sheets of its associated companies.<\/p>\n

To be sure, the appreciation in cryptocurrency prices this year has boosted the value of some of these assets, according to court filings made by the company\u2019s attorney. <\/p>\n

Bankman-Fried will face charges of wire fraud, securities fraud and money laundering when his trial in Manhattan federal court begins on Tuesday. <\/p>\n

CBS\u2019s \u201c60 Minutes\u201d aired an interview with Lewis \u2014 author of bestselling books like \u201cLiar\u2019s Poker,\u201d \u201cThe Big Short,\u201d \u201cMoneyball\u201d and \u201cThe Blind Side\u201d \u2014 on Sunday night where Lewis shared tidbits from his book about FTX and Bankman-Fried. The author was criticized for defending the erstwhile crypto wunderkind.<\/p>\n

At one point, Lewis claimed that SBF\u2019s fall had left a \u201cSam Bankman-Fried-shaped hole in the world.\u201d The author also said that \u201cif there hadn\u2019t been a run on customer deposits, they\u2019d still be sitting there making tons of money.\u201d<\/p>\n

See:<\/strong> The 5 weirdest Sam Bankman-Fried stories Michael Lewis told to \u201960 Minutes\u2019<\/p>\n

Others including Chanos pointed out that the firm wasn\u2019t just illiquid, but insolvent.<\/p>\n

A key difference between being illiquid and insolvent is that an illiquid firm has high-quality assets that it can either sell or use as collateral for loans, while an insolvent firm does not.<\/p>\n

For example, Alameda Research\u2019s balance sheet, according to initial reporting by CoinDesk that preceded the collapse of the group of companies, was stuffed with the FTT token, which was issued by Alameda\u2019s sister company, the FTX exchange, and which had seen a marked decline in value during the run-up to FTX\u2019s collapse. <\/p>\n<\/p><\/div>\n<\/div>\n