Coinbase CEO Brian Armstrong isn’t slowing down the attack. Almost two months after rival Sam Bankman-Fried’s empire went bankrupt, he has just dealt a powerful blow to what until recently was the institutional face of cryptocurrency. The Benkman-Fried empire consisted of the cryptocurrency exchange FTX.
Before the debacle, it was the third largest cryptocurrency exchange after Binance and Coinbase. Last February, FTX was valued at around $32 billion.
In addition to FTX, Bankman-Fried also founded Alameda Research, hedge fund which also serves as a cryptocurrency trading platform for institutional investors.
Both companies had to file for Chapter 11 bankruptcy on Nov. 11 because they were unable to complete the massive withdrawals that their customers and investors had requested.
Armstrong: “Dark times root out bad companies”
The Department of Justice and the Securities and Exchange Commission filed a number of civil and criminal charges, including fraud and conspiracy to defraud FTX’s customers and investors.
“Bankman-Fried orchestrated a multi-year fraud, siphoning off billions of dollars of trading platform customer funds for his own personal gain and to further his crypto-empire,” the claim states. SEC in his civil complaint.
Bankman-Fried, known in the cryptocurrency space by the initials SBF, was extradited to the US on December 21 by authorities in the Bahamas, where he lived and where FTX is headquartered.
He was released after his parents, both law professors at Stanford University, signed a $250 million bond, pledging their California home as collateral. According to media reports, two more friends with significant assets also signed the contract.
Bankman-Fried pleaded not guilty to the charges at a Jan. 3 hearing in U.S. District Court in New York. Bankman-Freed’s trial is scheduled for October 8.
Like many in the crypto industry, Coinbase’s Armstrong seems convinced that Bankman-Fried is to blame.
“In 2022, the cryptocurrency market trended downward along with the broader macro economy.” — wrote he to Coinbase employees in January to announce a new wave of layoffs. “We’ve also seen the consequences of unscrupulous industry players, and there could still be further contamination.”
“Dark times also weed out bad companies, as we see now. But those of us who believe in cryptocurrency will continue to build great products and increase economic freedom in the world.”
Armstrong remains optimistic about the future of cryptocurrency
Unlike FTX, Coinbase is a public company. This means that it is more transparent, especially to investors, and is closely monitored by regulators, including the SEC.
The company’s books are also published at the end of each quarter, allowing everyone to scrutinize them and get a good idea of the state of the platform.
This was not the case with FTX, which was a private company. The defunct crypto exchange did not need to open its books to investors or anyone else. As a result, investors and customers were forced to believe whatever the executives wanted to tell them.
After these blows to Bankman-Fried and his empire, Armstrong wants to be optimistic about the future of the crypto industry, which has been weakened by constant scandals.
“Despite everything we’ve been through as a company and industry, I’m still optimistic about our future and the future of cryptocurrency,” he wrote.
“Progress doesn’t always happen in a straight line, and sometimes it can feel like we’re taking two steps forward and one step back.
“But as we’ve seen on the Internet, the most important companies not only survive but thrive in down markets by keeping tight cost controls and continuing to create innovative products.”
