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Coinbase CEO Rejects FTX ‘Accounting Error,’ Says Funds Were Obviously ‘Stolen’

Brian Armstrong says only the “most gullible person” would believe an $8 billion hole was due to lackluster accounting.

3 min read
Coinbase CEO Brian Armstrong. Image: Coinbase

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 is no way billions of dollars could have simply slipped past FTX’s founder and former CEO, who graduated from the Massachusetts Institute of Technology with a degree in physics.

“I don't care how messy your accounting is … you're definitely going to notice if you find an extra $8B to spend,” he stated on Twitter. “​​Even the most gullible person should not believe Sam's claim that this was an accounting error.”

Coinbase’s CEO went on to state how he believed the mismatch on FTX’s balance sheet was created. “It's stolen customer money used in his hedge fund, plain and simple,” Armstrong wrote.

In the wake of FTX’s collapse, it has been alleged that $10 billion worth of customer funds had been secretly transferred to Alameda Research, a hedge co-founded by Bankman-Fried, according to reporting from Reuters.

But Bankman-Fried, also known as “SBF,” has claimed he didn’t “knowingly commingle funds” between FTX with Alameda. He chalked the $8 billion hole up to lackluster accounting in a recent interview with Bloomberg

He explained that funds from FTX users depositing money into their accounts were being sent to Alameda because some banks were more willing to work with a hedge fund than a crypto exchange. This led to some assets being double-counted as users’ accounts were credited, he claims.

FTX has since been described as a company with faulty corporate controls by John Jay Ray III, who oversees the exchange’s bankruptcy as its new CEO. The prominent lawyer, perhaps best known for handling the Enron collapse, described the FTX situation as “unprecedented,” and court documents have revealed the exchange did not have an accounting department.

Coinbase has seized on the collapse of FTX to depict itself as a trusted name in crypto, as the collapse of SBF’s empire casts a shadow over the entire industry and its prospective future. 

Less than a week after FTX filed for bankruptcy, Coinbase took out a full-page advertisement in the Wall Street Journal, titled “Trust Us.” It said millions of people had recently placed their trust and money with others that didn’t deserve it.

The swift shuttering of FTX has nonetheless tainted investors’ faith in crypto when it comes to both the price of digital assets and equities tied to the industry. Following FTX’s bankruptcy filing on Nov. 11, Coinbase’s stock price has fallen 17% to $47.67 from $57.46.

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