Following a recent incident in the cryptocurrency market, Coinbase CEO Brian Armstrong reassured customers by reassuring that the US cryptocurrency exchange is currently not at risk of bankruptcy, as some feared.
Coinbase reports worse-than-expected Q1 earnings
As previously reported, Coinbase stock (COIN) fell 16% in after-hours trading on Tuesday after the company released its worse-than-expected first-quarter earnings report.
The exchange fell 44% between January and March, resulting in a net loss of $430 million during that period. In the first quarter, the company’s annual revenue was $1.16 billion, down 35% from the expected $1.5 billion.
As Coinbase generates more than 85% of its revenue from cryptocurrency trading, the reason for its poor Q1 earnings report was the decline in the cryptocurrency market and increased volatility since the beginning of the year.
Coinbase File New Revealed
In the Q1 report, the major U.S. cryptocurrency exchanges 10-Q Public Submission Together with the Securities and Exchange Commission (SEC).
According to the disclosures, the customer may be treated as a “general unsecured creditor.” This means that if Coinbase declares bankruptcy, customers will be able to claim it last and thus lose all the cryptocurrencies stored on the exchange.
As expected, the new filing caused a stir among Coinbase customers as they would lose access to their funds in the event of bankruptcy. Black swap events in the market and the company’s first-quarter losses also contributed to the panic among users.
Armstrong: No risk of bankruptcy
Armstrong explained the new dossier to clients on Twitter on Wednesday, reassuring them that their funds were safe on the exchange despite uncertain market conditions.
1/ There’s a bit of noise today about the release of how we’re going to hold our crypto assets in 10Q. Tl;dr: Your funds are safe on Coinbase as always.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
Coinbase’s boss said the company is not at risk of bankruptcy and the 10Q filing is based on SEC requirements.
“We have no bankruptcy risk, but we have included a new risk factor based on the SEC requirement of SAB 121,” Armstrong said.
He also noted that the disclosure “makes sense” as such legal protections have not yet been tested for cryptocurrencies in court.
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