During his appearance on the show, Armstrong confirmed he was in contact with Sam Bankman-Fried (SBF) — the CEO of FTX, and Changpeng Zhao (CZ) — the CEO of rival exchange Binance, earlier in the week. The Binance CEO announced his intent to acquire the rival FTX exchange earlier this week and then rescinded his offer a day later after looking into the company’s financials. According to Armstrong, he spoke to CZ about “why he was considering buying [FTX]” and said he thought the deal was a ”bad idea”.
Brian Armstrong’s Timeline of the FTX Unraveling
Armstrong also shared his understanding of FTX’s collapse. According to him, earlier this year, around the time of the Luna and 3AC collapse, FTX’s market making company, Alameda, had taken big losses and was even potentially insolvent.
It was then that Sam Bankman-Fried used customer funds kept on the FTX exchange to continue funding Alameda’s operations — which may have included propping up distressed crypto companies Voyager and BlockFi. This is considered fraud under US law and may lead to significant penalties including jail time for the FTX founder.
Sam Bankman-Fried According to Brian Armstrong
Armstrong commented on his personal relationship with the FTX founder, saying Sam Bankman-Fried was a “bright, credible, competent person”. Commenting on the collapse of FTX, Armstrong admitted he “did not see this coming”. When thinking back to warning signs, Armstrong referenced mentally comparing Coinbase’s available cash that could be used for investments to the amount of capital being publicly deployed by SBF in investments such as his stake in popular trading platform Robinhood and his large political donations (SBF was the second biggest donor to the Democratic party in the 2021-2022 election cycle). Armstrong was puzzled by the large amount of cash available to the founder of an exchange with significantly less revenue than Coinbase.
Armstrong continues by referencing recent interviews SBF has done where, now that his dealings are out in public, it’s likely that he was lying about his intentions in bailing out Voyager and BlockFi.
The rest of Armstrong’s appearance on the podcast discussed his current work with US regulatory bodies and his efforts to get regulatory clarity for the crypto industry from US officials.
According to Armstrong, Coinbase does not have material exposure to Alameda, FTX, or FTT token.