Coinbase Chief Executive Brian Armstrong on Saturday condemned Sam Bankman-Fried’s account of how FTX found itself in an $8 billion hole.
Armstrong said there’s no way billions of dollars could have just slipped past FTX’s founder and former CEO, who earned a degree in physics from the Massachusetts Institute of Technology.
“I don’t care how messy your bookkeeping is… You’ll definitely notice if you spend an extra $8 billion,” he said Twitter. “Even the most gullible person should not believe Sam’s claim that this was an accounting error.”
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The Coinbase CEO went on to explain how he believes the discrepancy in FTX’s balance sheet arose. “It’s pure and simple stolen client money used in his hedge fund,” Armstrong wrote.
After the collapse of FTX, reports from Portal alleged that $10 billion worth of client funds were secretly transferred to Alameda Research, a hedge co-founded by Bankman-Fried.
But Bankman-Fried, aka “SBF,” has claimed he did not “knowingly mix funds” between FTX and Alameda. In a recent interview with Bloomberg, he attributed the $8 billion hole to lackluster accounting.
He explained that funds from FTX users who fund their accounts are sent to Alameda because some banks are more willing to partner with a hedge fund than a crypto exchange. This caused some assets to be double-counted when crediting users’ accounts, he claims.
FTX has since been described as having flawed corporate controls by John Jay Ray III, who becomes the new CEO overseeing the stock market’s bankruptcy. The prominent attorney, perhaps best known for handling Enron’s collapse, described the FTX situation as “unprecedented,” and court documents have revealed the exchange had no accounting department.
Coinbase has used the collapse of FTX to portray itself as a trusted name in crypto as the collapse of the SBF empire casts a shadow over the entire industry and its likely future.
The story goes on
Less than a week after FTX filed for bankruptcy, Coinbase ran a full-page ad titled “Trust Us” in The Wall Street Journal. It said millions of people had recently given their trust and money to others who didn’t deserve it.
The rapid shutdown of FTX has nonetheless hurt investor confidence in crypto when it comes to both the price of digital assets and stocks tied to the industry. Following FTX’s bankruptcy filing on Nov. 11, Coinbase’s share price has fallen 17% from $57.46 to $47.67.