The downfall of the FTX crypto exchange is currently the hot topic in the crypto industry and it is likely going to remain so for a while.
This is primarily due to the impacts it has had on the entire market and experts are trying to understand the reasons behind it in order to prevent it from repeating.
Sam Bankman-Fried, the former chief executive of FTX, has shared his account of how the company ended up in a hole of $8 billion.
However, Brian Armstrong, the chief executive of the Coinbase exchange, has condemned the explanation that the co-founder of FTX has put forward.
Not lackluster accounting
According to the Coinbase CEO, it is not possible that the FTX’s former CEO and co-founder would have missed billions of dollars.
Sam Bankman Fried graduated with a degree in physics from the Massachusetts Institute of Technology (MIT).
Armstrong said on Twitter that regardless of how lackluster and messy the accounting may be, you are definitely going to notice if you have an additional $8 billion available for spending.
He stated that Sam’s claim of the entire FTX fiasco happening due to an accounting error would not fool even the most gullible person.
As a matter of fact, the Coinbase boss also shared his own theory of how the mismatch that was found in FTX’s balance sheet had occurred in the first place.
Armstrong said that it was customer money that had been stolen and used in Bankman-Fried’s hedge fund.
Customer funds
Since the FTX crypto exchange collapsed, there had been reports claiming that customer funds worth $10 billion had been transferred secretly to Alameda Research.
This was the hedge fund that had been co-founded by Sam Bankman-Fried, but SBF, as he is known, had claimed that he had not comingled funds between FTX and Alameda knowingly.
As a matter of fact, in a recent interview, SBF had said that the $8 billion hole that had been discovered was a result of lackluster accounting on their part.
He elaborated that they had been transferring the funds that people were depositing on the FTX crypto exchange to Alameda because some of the banks preferred to deal with a hedge fund, as opposed to a crypto exchange.
He claims that because of these transfers, they had ended up double-counting some of the assets and credited the users’ accounts.
The aftermath
Since its downfall, the new CEO of the FTX crypto exchange, John Jay Ray III, who is overseeing the bankruptcy process, has defined the company as one that did not have proper corporate controls.
The new chief executive is a renowned lawyer who also dealt with the collapse of Enron and said that the situation of the crypto exchange was ‘unprecedented’.
In fact, court documents have also shown that the company did not have an actual accounting department.
The collapse of FTX has been used by Coinbase as a weapon to promote itself as a trusted name in the world of crypto.
The downfall of SBF’s empire has resulted in a lot of doubts about the crypto industry and shaken the confidence of participants.
Coinbase had posted a full-page advertisement a week after the FTX fiasco on Wall Street Journal that called on people to trust the exchange and not those who did not deserve it.
Nonetheless, many people have become skeptical of the crypto space after the FTX disaster and this is reflected in the equities and prices of digital assets.
The stock price of Coinbase has also declined since the bankruptcy filing of FTX last month. It has gone from $57.46 to $47.67, which is a drop of 17%.
