Coinbase CEO Slams SBF’s ‘Accounting Error’ Argument, Says Customer Funds Were ‘Stolen’

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• Coinbase (NASDAQ:COIN) CEO Brian Armstrong said on Sunday that not “even the most gullible person” should believe Sam Bankman-Fried’s claims that an “accounting error” caused $8 billion in customer funds to be lost.
• Armstrong said that customer funds were simply “stolen” and sent to Alameda Research. This was Bankman-Fried’s hedge fund, rumored to have used the money to cover its massive Terra Luna losses.

Coinbase CEO Brian Armstrong has slammed former FTX CEO Sam Bankman-Fried’s claims that up to $8 billion of customer funds were lost due to an “accounting error.”

Armstrong said no accounting mistakes could misplace such a large amount of money. He asserted that no one should believe Bankman-Fried’s claims that this was what happened.

“I don’t care how messy your accounting is (or how rich you are). You’re definitely going to notice if you find an extra $8B to spend. Even the most gullible person should not believe Sam's claim that this was an accounting error,” he said on Twitter on Sunday. Armstrong’s comment refers to the $8 billion balance sheet hole that FTX had before filing for bankruptcy. Bankman-Fried has tried to explain the massive discrepancy by saying that customers sent deposits to Alameda Research, FTX’s sister hedge fund, because banks were more willing to work with Alameda than a crypto exchange. This led to some assets being double-counted because users’ accounts on FTX were also credited.

According to the disgraced former crypto billionaire, he failed to notice how much customer funds were missing. He became aware of the problem only at the beginning of November when the dominoes started to fall.

However, Armstrong offered a simpler explanation as to what happened with customer funds on FTX.

“It’s stolen customer money used in his hedge fund, plain and simple,” he said. Former Alameda CEO Caroline Ellison has offered a similar explanation. Reports state that days after FTX blew up, she told Alameda’s staff that Bankman-Fried and other executives knew that customer funds were being funneled to Alameda to cover its huge losses incurred by the fallout of Terra Luna in June.

This might have been avoided by having a chief financial officer or an accounting department. But recent court filings show that FTX had neither. John Jay Ray III, the new FTX CEO overseeing the exchange bankruptcy, has labeled the FTX situation as “unprecedented.”

On the Flipside

• It’s still unclear what happened with customer funds on FTX. It seems like FTX and Alameda are trying to put the blame on each other.
• It looks like only the court will decide who’s guilty and who’s not.

Why You Should Care

Brian Armstrong is one of the most important people bridging the centralized and decentralized worlds. His belief that FTX stole customer funds speaks to the gravity of the situation and the negative implications it has for the crypto industry.

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