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Coinbase CEO Brian Armstrong Says Sam Bankman-Fried Probably Committed Fraud, Warns of More FTX Contagion

Coinbase CEO Brian Armstrong is weighing in on the collapse of crypto trade FTX, saying that the agency’s CEO Sam Bankman-Fried most likely dedicated some type of fraud throughout the ordeal.

In a brand new interview on the All-In Podcast, Armstrong says he spoke to each Bankman-Fried and Binance CEO Changpeng Zhao (CZ), who briefly entertained the concept of buying FTX, because the collapse was unfolding.

“I spoke to Sam about – he was making an attempt to boost emergency financing and issues like that, and I spoke to CZ about why he was contemplating shopping for the [exchange], I assumed it was a nasty thought. However my understanding of what occurred at this level is… FTX was able the place they’d this market maker, Alameda [Research], that was investing in dangerous issues, and that’s high-quality. Market makers, hedge funds, they’re designed to take extra dangers. It seems that at this level again over the last shake-up within the crypto business the place Terra (LUNA) and Voyager and Celsius and Three Arrows [Capital] went beneath, it seems that Alameda took an enormous loss at the moment as nicely.”

Armstrong says that as a substitute of letting Alameda take the loss, the FTX CEO probably dedicated fraud by transferring buyer funds from the crypto trade over to his quant buying and selling agency.

“They’d this solvency challenge and as a substitute of simply letting it blow up, Sam mainly stated, ‘Hey we now have a bunch of buyer property over right here at FTX’ or he by some means mainly made a mortgage from FTX into Alameda making an attempt to prop it up. I don’t know why he did that. That’s the second in my thoughts the place he crossed the road into most likely committing fraud. I believe he most likely lied to customers, lied to buyers and he went round and tried to bail out these totally different firms like Voyager and BlockFi to kind of come off of this factor and possibly he thought he may commerce his approach out of it.”

The Coinbase CEO says there’s a likelihood {that a} contagion may unfold into the opposite areas of the crypto business, negatively affecting different companies. He additionally reveals that a number of unnamed firms contacted Coinbase asking for emergency financing.

“I do assume there’s a some contagion danger right here. I believe there’s different companies that had cash simply sitting in FTX, and that’s now going by way of chapter courtroom. In order that’s been dangerous. Multicoin [Capital] got here out publicly and stated that they’d 10% of their portfolio sorted on FTX. There’s different companies that Alameda might have had loans with, and people companies are most likely struggling.

I don’t need to say who, however we’ve obtained a few inbound calls from different folks making an attempt to get emergency financing. There’s individuals who might have simply – completely totally different from FTX and Alameda – they might have simply had their very own portfolio that they took margin or leverage on to purchase crypto and now that costs have come down just a little bit, they’re getting stopped out, in order that’s all been very difficult.”

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