Coinbase CEO Brian Armstrong has dispelled concerns about bankruptcy. Tweet. He allayed the fears of Coinbase users by saying that the company’s latest quarterly filing was done with the requirements of the US Securities and Exchange Commission (SEC) in mind.
He also noted that he had nothing to do with companies that were at risk of bankruptcy. Armstrong’s statement comes after Coinbase included a new risk factor in its mandatory disclosures in its quarterly filings.
In case of bankruptcy, crypto assets held by the exchange may be considered assets in bankruptcy proceedings and clients may be treated as ordinary unsecured creditors. Unsecured creditors will be among the last to be paid in bankruptcy and will be the last in line for claims.
This little reveal caused panic among users, and Twitter users flooded with messages. Users feared that keeping their coins on the platform would be a risky move.
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No fear of bankruptcy
In a series of tweets, Armstrong addressed all his speculative fears. He said there was no risk of bankruptcy and the clients’ funds are perfectly safe on the platform. An explanation was also included that the disclosure was provided to meet the SEC’s requirements.
He also tweeted that “a court will decide to consider customer assets as part of the company in bankruptcy proceedings,” but the possibility remains.
We also had “strong legal protections in terms of services protecting assets even in black swan events like this” for Prime and Custody customers.
To examine the best interests of retail customers, he said, Coinbase is working to update terms that guarantee the same amount of protection to retail customers.
In one of his other statements, he added:
We should have updated our retail terms sooner and didn’t notice in advance when this risk disclosure was added. my deep apology
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Coinbase failed to meet market expectations
According to the report, Coinbase’s share price is down 15% when viewed 24 hours ago. The exchange platform also reported a net loss of $430 million as a public company in the first quarter of this year.
The company’s share price plummeted by nearly 70% due to the growing weakness in the market, raising fears among customers.
Coinbase’s revenue is $1.17 billion, down 27% from $1.6 billion in the first quarter of 2021. During a period of continuing turbulence witnessed by the global cryptocurrency market, monthly users also fell by more than 19% to 9.2 million. At the time of writing, Coinbase shares are down 17.4%.