PanaTimes

Saturday, Jan 28, 2023

Coinbase warns customers they may lose crypto if company goes bankrupt

Coinbase warns customers they may lose crypto if company goes bankrupt

Following an epic share price decline of more than 27% this week, Coinbase issued a stark warning to customers: Your crypto is at risk if the exchange goes bankrupt.

According to Coinbase's official website, the company has more than 98 million verified users. It is the largest cryptocurrency exchange platform in the United States.

Coinbase's CEO Brian Armstrong attempted to calm shareholders in a series of tweets one of which read: 'Your funds are safe at Coinbase, just as they’ve always been.'

Despite Armstrong's claims, in an SEC filing the company referred to customers as 'unsecured creditors' in the event that Coinbase went belly-up.

Coinbase's CEO Brian Armstrong attempted to calm shareholders in a series of tweets one of which read: 'Your funds are safe at Coinbase, just as they’ve always been'

Coinbase shares tumbled 30% on Wall Street after a regulatory filing by the company revealed any crypto it held for customers 'could be subject to bankruptcy proceedings'


This means that customers' crypto assets would be considered the property of Coinbase by bankruptcy administrators.

The SEC filing, Staff Accounting Bulleting 121, requires crypto platforms to include customer's crypto holdings as assets and liabilities on balance sheets.

Armstrong wrote on Twitter that the company is at 'no risk of bankruptcy' despite the filing, which he said was made so that company would be in compliance with SEC regulations.

The new regulation is designed to protect crypto traders by giving them more in-depth knowledge about the company's contingency plan in the event of bankruptcy.

Armstrong began his Twitter speech shortly after his company's earnings report was made public









Armstrong tweeted: 'This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically, and it is possible, however unlikely, that a court would decide to consider customer assets as part of the company in bankruptcy proceedings even if it harmed consumers.'

In the first quarter of 2022, Coinbase posted a loss of $430 million amid a 19% drop in monthly users. The company has said that trading is likely to keep going down in the second quarter.

Another contributing factor has been the falling price of bitcoin.

At the time of writing, the price of bitcoin is $28,434.70, down 8% from yesterday. This is the first time bitcoin has fallen below $30,000 since July 2021.

Coinbase's shares, which tend to track the health of the wider crypto sector, have lost around 85 per cent of their value since its debut on Wall Street in April last year.

In their May 2022 earnings report, the company bragged about their first Super Bowl ad which came with the slogan: 'Less talk, more Bitcoin.'

The report says the ad reached 40 million households and generated millions of social media mentions 'resulting in significant improvements in our brand awareness, favorability, and consideration, among our target audience.'

Alesia Haas, chief financial officer of Coinbase Global Inc.


The ad cost the company $14 million and the day after Super Bowl Sunday, the company's share price fell nearly 2%, according to Reuters.

Coinbase Chief Financial Officer Alesia Haas said on a call with analysts on May 11 that the company decided to spent money on 'diversifying product lines' rather than focus on profits, reports CNBC.

In January 2022, Brian Armstrong bought a five acre estate in Bel Air at a cost of $133 million.

According to Coinbase's earnings report, the company said that they hold $256 billion in crypto and fiat money on behalf of their customers.

When a user opens a Coinbase account and buys cryptocurrency, the company holds that crypto on the application's wallet. This 'means the individual is giving away at least part of their control over their own funds,' according to Fortune Magazine.

Following Russia's invasion of Ukraine in February, Coinbase announced in a statement that they had suspended the accounts of 25,000 Russian Coinbase wallets.

The statement accused those account holders of 'engaging in illicit activity, many of which we have identified through our own proactive investigations.'

Crypto exchanges do not have a federal protection such as the Federal Deposit Insurance Corporation that protects customers of traditional banks in the US.

In the first quarter of 2022, Coinbase posted a loss of $430 million amid a 19% drop in monthly users. The company has said that trading is likely to keep going down in the second quarter


The money that customers deposit at traditional banks is protected to the tune of $250,000, in the event that the bank in question goes bankrupt.

There is the option of personal cryptocurrency insurance for traders.

On Twitter, Armstrong issued an apology to shareholders for not being more open about the company's new SEC filing saying they 'didn't communicate proactively when the risk disclosure was added.'

Newsletter

Related Articles

PanaTimes
Close
0:00
0:00
Tesla reported record profits and record revenues for 2022
Germany confirms it will provide Ukraine with Leopard 2 tanks
Prince Andrew and Virginia Giuffre Photo Is Fake: Ghislaine Maxwell
Opinion | Israel’s Supreme Court Claims a Veto on Democracy
Moonwalker Buzz Aldrin Gets Married On His 93rd Birthday
Who’s Threatening Israeli Democracy?
Federal Reserve Probes Goldman’s Consumer Business
China's first population drop in six decades
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
Tesla slashes prices globally by as much as 20 percent
1.4 Million Copies Of Prince Harry's Memoir 'Spare' Sold On 1st Day In UK
After Failing To Pay Office Rent, Twitter May Sell User Names
Lisa Marie Presley, singer and daughter of Elvis, dies aged 54
FIFA president questioned by prosecutors
Britain's Sunak breaks silence and admits using private healthcare
Hype and backlash as Harry's memoir goes on sale. Unnamed royal source says prince 'kidnapped by cult of psychotherapy and Meghan'
Saudi Arabia set to overtake India as fastest-growing major economy this year 
Google and Facebook’s dominance in digital ads challenged by rapid ascent of Amazon and TikTok
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
TikTok CEO Plans to Meet European Union Regulators
France has banned the online sale of paracetamol until February, citing ongoing supply issues
Japan reportedly to give families 1 million yen per child to move out of Tokyo
Will Canada ever become a real democracy?
Hong Kong property brokerages slash payrolls in choppy market
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
Effect of EU sanctions on Moscow is ‘less than zero’ – Belgian MEP
Coinbase to Pay $100 Million in Settlement With New York Regulator
FTX assets worth $3.5bn held by Bahamas securities regulator
A Republican congressman-elect is under investigation in New York after he admitted he lied about his education and work experience.
Brazilian football legend Pele, arguably the greatest player ever, has died at the age of 82.
Hong Kong to scrap almost all its Covid rules
EU calls screening of travellers from China unjustified
US imposes Covid testing for visitors from China
Ukraine President Volodymyr Zelenskyy Addresses Joint Session of Congress - FULL SPEECH
Where is Rishi? Chancellor Jeremy Hunt's excuses about the UK's economic challenges just don't make sense
Former FTX CEO Bankman-Fried finally arrested in Bahamas after U.S. files charges
Corruption works: House Financial Services Chair Waters doesn't plan to subpoena her donor, Sam Bankman-Fried, to testify at hearing on FTX collapse
Ronaldo's new contract...
Prince William's godmother resigns honorary royal role after exposing her/their racism
Tax fraud verdict again exposes illusion of Trump the master businessman
Tax fraud verdict again exposes illusion of Trump the master businessman.
Yellen hints at ‘national security’ probe into Twitter purchase
Elon Musk reinstates Donald Trump's Twitter account.
Good news: US moves to shield Saudi crown prince in journalist killing
George W. Bush and Barack Obama will hold back-to-back disinformation conferences
Mission Improbable: Tom Cruise & Queen Elizabeth
Miss Argentina and Miss Puerto Rico are not single anymore
Boris Johnson is about to sign a contract with an American company to get millions for giving speeches. Something he did until very recently for free.
Solar + Powerwall ensures you never lose power, even if the grid goes down
Bavarian Prime Minister Söder: "There is no reason for mask obligations, no lockdowns anymore”
×