Coinbase CEO Brian Armstrong said that the recent FTX and Alameda debacle was a result of risky practices such as the misuse of user funds.
Amid the liquidity crisis that fell over crypto exchange FTX and trading firm Alameda Research, some of the largest crypto companies face calls for transparency to let users know if there are risks. However, executives assured the community that they do not have exposure to either of the troubled firms.
In response to concerns brought up by the crypto community, Tether CTO Paolo Ardoino clarified in a tweet that the stablecoin issuer has no exposure to either of the distressed firms. According to the Tether executive, Alameda has previously redeemed a lot of Tether (USDT). Despite this, Ardoino highlighted that no credit exposure has matured.
Similarly, Circle CEO Jeremy Allaire also denied rumors of the firm having exposure to FTX and Alameda. The stablecoin executive said that their firm does not have any material exposure to both firms. Allaire highlighted that while both FTX and Alameda have been customers of Circle, the stablecoin issuer has not made loans, received FTX tokens (FTT) as collateral or taken any positions on FTT.
Brian Armstrong, the CEO of crypto exchange Coinbase, also took this opportunity to assure its users that the firm has no material exposure to FTX or FTT. Armstrong also highlighted that the crypto exchange has no exposure to Alameda. The exchange executive also criticized the event as a result of risky business practices such as the misuse of customer funds and conflicts of interest.
Despite the assurances given by the executives, some community members are still dissatisfied and called for accountability. According to a Twitter user, no one would believe it anymore as this was also what FTX CEO Sam-Bankman Fried said before the crisis. The community member said that there have to be consequences for these types of events. “You want credibility: Find SBF and put him in a hole,” they said.
As the FTX and Alameda crisis ensued, Binance CEO Changpeng Zhao promised to implement a way to provide full transparency of its reserves by using a Proof-of-Reserve mechanism using Merkle Trees. Apart from Zhao, other high-profile industry figures have also supported the use of Proof-of-Reserves to give consumers more confidence and establish trust within the industry.