Coinbase CEO Armstrong says Bankman-Fried’s US$8 bln ‘accounting error’ doesn’t stand up

Coinbase Global Inc. Chief Executive Brian Armstrong said Sam Bankman-Fried’s explanation of sloppy accounting as the reason US$8 billion moved from his crypto exchange FTX to brokerage arm Alameda Research doesn’t stand up to scrutiny. Bankman-Fried gave the reasoning in an interview with Bloomberg published on Friday.

See related article: Enron veteran is FTX’s new head: Does he have what it takes to win back user’s funds?

Fast facts

  • “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,” Armstrong tweeted on Sunday, in reference to the funds showing up at Alameda. “Even the most gullible person should not believe Sam’s claim that this was an accounting error.”

  • Armstrong, whose exchange was a rival of FTX, then alleged the money was “stolen” customer funds which were used to cover a hole in Alameda’s balance sheet. Both FTX and Alameda are now in bankruptcy proceedings.

  • U.S. court bankruptcy filings of the Bahamas-based exchange allege that funds were siphoned from FTX to both cover Alameda’s loans and facilitate crypto trading.

  • “I wasn’t running Alameda, I didn’t know exactly what [was] going on. I didn’t know the size of their position,” Bankman-Fried said in response to these allegations at the New York Times DealBook Summit on Nov. 30.

  • Newly installed FTX boss John J. Ray III, a Chicago-based lawyer who managed the bankruptcy of Enron Corp. in 2001, has described FTX as having the worst examples of corporate controls he has witnessed.

  • A “substantial amount of assets” of collapsed cryptocurrency exchange FTX have either been stolen or are missing, an attorney for FTX said on Nov. 22 at its first hearing in the federal bankruptcy court in Delaware, U.S.

  • “What we have is a worldwide organization but an organization that was run, effectively as a personal fiefdom of Sam Bankman-Fried,” said James Bromley of law firm Sullivan & Cromwell, who was appointed counsel by the new FTX leadership.

  • In the fallout from the FTX collapse, Coinbase has looked to position itself as a reliable crypto exchange, taking out a full-page ad in the Wall Street Journal simply titled “Trust Us.”

See related article: Sam Bankman-Fried regrets bankruptcy filing, blames “messy accounting”: Vox interview