Coinbase CEO Armstrong: ‘Baffling’ FTX’s Bankman-Fried not in custody

“The DoJ or somebody should be able to come in — just based on his public statements, I think it’s a very open and shut case for fraud,” Armstrong said at the a16z crypto founders meeting on Tuesday. He added: “I’m no expert on this, but the people I talk to seem to agree.”

Armstrong also questioned why the media has refrained from calling Bankman-Fried a criminal.

“I think we were all quite shocked to see the extent of the fraud that went on at FTX. And let̵[ads1]7;s call it fraud. We have to call it what it actually is. It’s been quite bizarre that the mainstream media hasn’t really come out and said : ‘This guy is a criminal.’ Maybe they’ll wait until he’s actually indicted or something like that, and in custody. But it seems very clear at this point that that’s the case.”

FTX spectacularly imploded last month, surprising many inside and outside the crypto sector. The $32 billion exchange had established itself as a leader in the field, having enlisted star athletes like Tom Brady and other celebrities to boost its image. The collapse shook confidence in the crypto sector and spurred calls for tighter regulation.

Bankman-Fried stepped down as CEO of FTX on November 11, the same day the company, along with associated trading arm Alameda Research, filed for bankruptcy. A central charge against Bankman-Fried is that he used client funds from his crypto exchange to finance risky bets at Alameda Research.

Armstrong’s Coinbase is, like FTX, a cryptocurrency exchange. But while Bankman-Fried based FTX 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 audited by a third party, you don’t have to trust us. All customer funds are segregated. We do not invest any client funds without their explicit direction.”

“People want to go to jail”

Armstrong wasn’t the only crypto luminary to share tough views on Bankman-Fried this week. Mike Novogratz, CEO of crypto firm Galaxy Digital Holdings, told Bloomberg TV on Thursday, “Sam and his cohorts perpetuated a scam. They used customer money to make bets that he ‘poorly risk-managed’ after he made them.”

“The problem was he took our money,” Novogratz added. “And so he needs to be prosecuted. People want to go to jail, and should go to jail.”

Shares in Coinbase and Canada-listed Galaxy Digital both plunged more than 25% last month, worsening an already brutal “crypto winter.” Coinbase shares have fallen roughly 80% this year, wiping out about $44 billion in value. BlackRock CEO Larry Fink said this week, “I actually think most companies are not going to exist,” referring to the beleaguered crypto sector.

Last week, Mark Cuban, billionaire owner of the Dallas Mavericks and a prominent crypto investor, told TMZ that Bankman-Fried should be worried about jail time.

“I don’t know all the details, but if I were him, I would be afraid to go to prison for a long time,” he said. “It sure sounds bad. I actually talked to the guy and I thought he was smart, but boy, I had no idea he would take other people’s money and use it for personal use. Yes, that sure seems like what happened.”

Armstrong lamented the fact that the crypto sector attracts a disproportionate number of bad actors.

“We kind of have to come to terms as an industry with the fact that I think our industry attracts a disproportionate share of fraudsters and scammers. And that’s really unfortunate. That doesn’t mean it’s representative of the entire industry.”

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