What Michael Lewis got wrong about FTX

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In today’s newsletter:

Wall Street grabs its popcorn for the FTX trial

The Big Short author Michael Lewis has spent his career chronicling the gall and gluttony of Wall Street. His latest character study, on Sam Bankman-Fried, covers similar themes.

The cryptocurrency wunderkind-turned-alleged fraudster’s trial is set to begin with jury selection on Tuesday.

“There’s a story war going on in the courtroom. And I think neither one of those stories is as good as the story I have,” he told 60 Minutes on Sunday. His upcoming book Going Infinite is the product of unfettered access to Bankman-Fried.

But there’s one bit from the 60 Minutes interview we’d like to push back on.

Lewis, who began to write his all-access account of SBF before his crypto exchange FTX imploded, offered a charitable assessment of the former billionaire’s current predicament:

Lewis said: “This isn’t a Ponzi scheme. Like, when you think of a Ponzi scheme, I don’t know, Bernie Madoff, the problem is — there’s no real business there. The dollar coming in is being used to pay the dollar going out. And in this case, they actually had — a great real business.”

Readers may remember that the FT obtained documents FTX sent to investors last year, which revealed that the exchange — remember this isn’t a bank — held just $900mn in easily sellable assets against $9bn of liabilities the day before it collapsed into bankruptcy.

Also included was a shoddily assembled pitch seeking $6bn to $10bn in cash in a last-ditch attempt to salvage the company, which would’ve gotten him laughed out of any boardroom on Wall Street. The so-called “data room” SBF had sent to prospective investors “was a joke,” said our source at the time. “It was an investment club-level data room.”

It didn’t strike us as a “great” business. It’s also debatable whether SBF’s trading operations were more legitimate than Madoff’s market-making operation, which was large and separate to his infamous Ponzi scheme.

Tuesday’s jury selection will kick off what’s expected to be a six-week trial, in which the 31-year old faces charges of fraud and money laundering. If convicted, SBF could spend the rest of his life in prison.

As SBF and his legal team, led by Mark Cohen, prepare their defence, Wall Street will be most interested in what blowback the case has in store for the big names attached to FTX.

The fallen crypto empire courted high-profile investors, including large investment firms Sequoia Capital and Thoma Bravo, pension funds such as Ontario Teachers’ Pension Plan and hedge fund billionaires Izzy Englander and Alan Howard.

Meanwhile, its founder rubbed shoulders with some of the world’s most influential financiers, politicians, and celebrities — from Goldman Sachs chief executive David Solomon to former US president Bill Clinton and supermodel Gisele Bündchen.

SBF’s former fans and foes will no doubt be watching the trial closely, as will DD.

In the meantime, the FT’s Henry Mance is due to sit down with Lewis next week for an exclusive DD forum. We’ll report back on his trip down the FTX rabbithole.

Can Birkenstock help bring IPOs back in fashion?

An eleventh-hour deal struck by the US congress over the weekend not only prevented the government from shutting down, it also eased the path for the German sandal maker Birkenstock to push forward with an initial public offering.

Birkenstock on Monday filed an updated prospectus that included plans to price its shares between $44 and $49. At the top end, that would raise up to $1.6bn and value the company at more than $9bn.

Had the US government shut down without funding, a lack of regulatory staff could have hampered the company’s efforts to move ahead with an offering of its shares expected next week.

Fortunately for Birkenstock and its private equity owner L Catterton, they can now follow on the heels (pun intended) of IPOs last month in the US for Arm, Instacart and Klaviyo.

However, while all three of those companies priced deals at the top of or above their target ranges, trading in the stocks has been mixed in the weeks since.

Venture capitalists are eager for the IPO window to reopen, but they’re still advising companies to hold off for now after choppy debuts.

A valuation topping $9bn would mark an impressive outcome for L Catterton, which is backed by the French luxury fashion house LVMH. The US private equity firm acquired its majority stake in Birkenstock in a €4bn deal just two years ago.

Birkenstock and its advisers — including Goldman, JPMorgan Chase, and Morgan Stanley — have lined up anchor investors to support the deal. Among them are the family holding company of LVMH CEO Bernard Arnault and Norway’s sovereign wealth fund.

DD will leave it to our colleagues who cover fashion to opine on the aesthetics of the shoes, but their appeal is broad. The company reported revenues of €1.1bn in the nine months to the end of June, up 21 per cent year on year.

The ‘tuna bonds’ stench that Credit Suisse left behind

Of all the legal headaches that Credit Suisse bequeathed to UBS, there may be none more complex or just plain bizarre than the Swiss bank’s role in the $2bn “tuna bonds” scandal that backfired on one of the world’s poorest economies.

This sordid affair closed a chapter on Monday, the FT’s Joseph Cotterill and Owen Walker report, after UBS settled with Mozambique.

The settlement covers a key loan that the African nation guaranteed under deals arranged by Credit Suisse and others to fund tuna boats and other projects from 2013, and which allegedly masked hundreds of millions of US dollars in kickbacks before they imploded in a messy default.

A decade later, the saga is set to be laid out in agonising detail over the next few weeks as a London court hears a claim Mozambique brought for damages against various defendants over the loans. They also include Gulf shipbuilder Privinvest, which denies wrongdoing.

But the involvement of UBS will now be much diminished.

Full details of the deal haven’t been disclosed but may involve less than $100mn of debt forgiveness on the part of the bank. For UBS, it’s another day in resolving the sins of its smaller rival.

But it’s not over yet for Mozambique. The African country has been spending £3.5mn a month on its UK lawyers, Peters & Peters, for the tuna bond litigation, according to its finance minister.

Despite the Credit Suisse settlement, the tuna bond trial of the century is still on for later this month.

Job moves

• BP’s top US executive Dave Lawler is leaving the company and will be replaced by company insider Orlando Alvarez. Separately, the allegations that prompted Bernard Looney’s resignation as BP’s CEO included an accusation that he promoted women with whom he had undisclosed past relationships, according to people familiar with the matter. 

• Carlyle has named Goldman Sachs veteran Jeff Nedelman as global head of distribution. He was most recently a partner and senior managing director at Certares. It also has promoted Will McMullan and Anna Tye as co-head of its financial services and technology investment groups, respectively, and disbanded its consumer, media and retail investment team in the US, according to a memo seen by the FT.

• HSBC’s head of public affairs Sherard Cowper-Coles is stepping down, weeks after making a public apology for saying the UK government had been “weak” by curtailing its dealings with China because of US pressure.

• GAM’s new board has appointed Elmar Zumbuehl as chief executive of the Swiss asset manager, after the previous board stepped down following the blocking by activist investors of a takeover bid by UK rival Liontrust.

Smart reads

Third Point’s rough year Dan Loeb’s hedge fund made a bruising error in reading the market. It’s now facing an onslaught of withdrawals, The Wall Street Journal reports.

Fake news Bad press is often blamed for London’s listings woes. But it isn’t the media’s job to improve the listings environment, it’s the regulator’s, writes the FT’s Helen Thomas.

The Hamish Ogston scandal A Sunday Times investigation reveals evidence suggesting that the British multi-millionaire and philanthropist has engaged in the exploitation of south-east Asian sex workers over the past 15 years.

News round-up

Frankfurt prosecutors charge German citizen with insider trading (FT)

VCs tell start-ups to delay IPO plans after Arm and Instacart underwhelm (FT)

Axel Springer expresses interest in buying UK’s Telegraph group (FT)

Wall Street bankers hope for dealmaking rebound after boom and bust (FT)

Indian conglomerate Vedanta to break up as debt crunch looms (FT)

Deutsche Bank gets regulatory monitor after surge in Postbank complaints (FT)

X signs live shopping deal with Paris Hilton in bid to revive its fortunes (FT)