““We have no risk of bankruptcy.””
That’s from Brian Armstrong, CEO and co-founder of cryptocurrency exchange platform Coinbase COIN,
In a series of tweets Tuesday afternoon, Armstrong addressed a recent filing of a Coinbase 10-Q document with the Securities and Exchange Commission that used language detailing risk factors with retail investors’ crypto assets in the event of a Coinbase filing for bankruptcy; To be clear, Armstrong reiterated that bankruptcy is not likely.
But if a “black swan event,” as Armstrong called it, ever occurs, some retail investors on the exchange may lose their crypto if a court deems those assets part of the company in legal proceedings, he said.
“Because crypto assets in escrow may be considered the property of a bankrupt estate, in the event of bankruptcy, the crypto assets we hold in escrow on behalf of our clients could be subject to bankruptcy proceedings and such clients could be treated as our general creditors. unsecured,” Coinbase wrote in the SEC filing.
In a message on its website on Wednesday, Coinbase tried to reassure users. “TLDR: Your funds on Coinbase are safe, secure, and yours,” the company said. “You may have heard some noise recently about who owns your assets and what claims Coinbase creditors may have on them. The reality is that your assets are… your assets. Neither ours nor anyone else’s.”
See also: Mark Cuban says that ‘crypto is going through the pause that the Internet went through’
Unlike cryptocurrencies, shares held by a registered broker such as Charles Schwab SCHW,
they are legally separate from the assets of the brokerage, which means they cannot be garnished in bankruptcy proceedings, The Wall Street Journal reports.
The news comes as prices of many cryptocurrencies including bitcoin BTCUSD,
and Ethereum ETHUSD,
they are down more than 30% in the last three months, highlighting a downward trend for digital assets.
See Also: Why This Financial Advisor Says Crypto Belongs In His 401(k)
Armstrong’s tweets were posted the day before shares of Coinbase Global Inc. crashed on Wednesday after the company’s earnings showed a slowdown in cryptocurrency trading.
“We tend to be able to acquire great talent during those periods and others spin around, get distracted, get bummed out,” Armstrong said on Wednesday’s earnings call. “So we tend to do our best work in a down period.”
Coinbase shares fell 26.8% during trading on Wednesday. Shares of Coinbase are also down 75.1% in the past three months, compared to a 14% drop for the S&P 500 SPX Index.
during the same period