Coinbase’s co-founder and CEO, Brian Armstrong, addressed fears about a recent disclosure the company made.
A Coinbase report that declared its losses has gained traction on social media. This disclosure suggests that users are not covered in bankruptcy. Brian Armstrong, Coinbase CEO, stated that funds are secure “as they have always been.”
Coinbase’s first-quarter report for 2022 revealed a loss of $430 million. The firm also reported that the number of users who transact on the exchange dropped from 11.4 to 9.2 million.
Twitter users raised concerns about bankruptcy protection after the loss was reported. They quoted lines from the disclosure as saying, “In the event that a bankruptcy occurs, the crypto assets that we hold for our customers could be subject to bankruptcy proceedings.”
The disclosure also stated that users would be considered “unsecured creditors” if this happens. It was speculated that the coins they held would be company property if Coinbase goes bankrupt.
Armstrong responded to these concerns by stating that there is no risk of bankruptcy for the company and that customer funds remain safe. Armstrong said however that it was unlikely that a court would consider consumer assets in bankruptcy proceedings, “even if it hurt customers.”
There is no risk of bankruptcy. However, we added a new risk factor based upon an SEC requirement, SAB 121. This is a disclosure that public companies who hold crypto assets for third-parties must make. https://t.co/lwmgb1kFtA
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
Armstrong explained that prime and custodial customers are protected by strong legal protections in the terms of service. These terms also protect assets in the event of bankruptcy. He noted that the team is currently updating its terms in order to provide the same protections for retail customers.
The Coinbase CEO is still bullish despite the negative news surrounding the loss report. Armstrong stated that Coinbase has been through many crypto cycles including the largest drawdowns and is, therefore “well-suited” to continue operating in these turbulent waters.