Brian Armstrong believes FTX founder Sam Bankman-Fried should be in prison by now. Coinbase’s CEO said this week it “baffles me why he isn’t already in jail.”
“The DOJ or anyone should be able to, based solely on their public statements, I think there is a very open case for fraud,” Armstrong said at Tuesday’s a16z Crypto Founders Summit. He added, “I’m not an expert on this, but the people I speak to seem to agree on that.”
Armstrong also questioned why the media doesn’t label Bankman-Fried a criminal.
“I think we were all quite shocked when we saw the level of fraud at FTX. And let’s call it a scam. We must call it what it actually is. It was pretty bizarre that the mainstream media didn’t really come out and say, “This guy’s a criminal.” Maybe they want to wait until he’s actually charged or something, and taken into custody. But it seems very clear at this point that this is the case.”
FTX imploded in spectacular fashion last month, surprising many inside and outside the crypto space. The $32 billion exchange had established itself as a leader in the field, recruiting star athletes like Tom Brady and other celebrities to boost its image. Its collapse shook confidence in the crypto sector and spurred calls for tighter regulation.
Bankman-Fried resigned as CEO of FTX on Nov. 11, the same day the company filed for bankruptcy along with affiliated trading arm Alameda Research. A key allegation against Bankman-Fried is that he used customer funds from his crypto exchange to fund risky bets at Alameda Research.
Armstrong’s Coinbase, like FTX, is a cryptocurrency exchange. But while Bankman-Fried FTX is based in the Bahamas — where he reportedly enjoyed an extravagant penthouse lifestyle — Coinbase is a public company in the US
“You can read our financial statements,” Armstrong said. “They are checked by a third party, you don’t have to trust us. All client funds are segregated. We do not invest client funds without their express instructions.”
The story goes on
“People will go to jail”
Armstrong wasn’t the only crypto luminary to share harsh views on Bankman-Fried this week. Mike Novogratz, CEO of crypto firm Galaxy Digital Holdings, told Bloomberg TV on Thursday, “Sam and his colleagues continued a scam. They used client funds to make bets which he ‘poorly managed with the risk’ after making them.”
“The problem was that he took our money,” added Novogratz. “And that’s why he needs to be prosecuted. People will go to jail and should go to jail.”
Shares of Coinbase and Canada-listed Galaxy Digital both plunged more than 25% over the past month, exacerbating an already brutal “crypto winter.” Coinbase shares are down about 80% this year, losing about $44 billion in value. BlackRock CEO Larry Fink said this week, “I actually think most of the companies are going to be gone,” referring to the ailing crypto sector.
Last week, Mark Cuban, the billionaire Dallas Mavericks owner and prominent crypto investor, told TMZ that Bankman-Fried should be concerned about jail time.
“I don’t know all the details, but if I were him I would be scared of going to jail for a long time,” he said. “It sure sounds bad. I actually spoke to the guy and thought he was smart but boy did I have no idea he would take other people’s money and use it for his own personal use. Yes, that’s for sure… seems like the way it happened.”
Armstrong bemoaned the fact that the crypto sector is attracting an excessive number of bad players.
“We kind of have to come to terms as an industry that I think our industry attracts a disproportionate amount of scammers and scammers. And that’s really a shame. That doesn’t mean it’s representative of the entire industry. ”
This story was originally featured on Fortune.com
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