Coinbase CEO Brian Armstrong says the disclosure does not indicate bankruptcy risk

Coinbase’s chief executive said a disclosure in its latest quarterly filing did not indicate that the cryptocurrency exchange operator faced bankruptcy risk and was made to comply with a US Securities and Exchange Commission (SEC) requirement.

Brian Armstrong made his comments after Coinbase said on Tuesday that in the event of bankruptcy, crypto assets held by the exchange could be considered property of the bankruptcy proceedings and customers could be treated as general unsecured creditors.

An unsecured creditor would be one of the last to be paid in a bankruptcy and last in line for claims.

Coinbase, whose shares tumbled 15 percent in extended trading on Tuesday, also missed estimates for first-quarter earnings and posted a loss as turmoil in global markets dampened investors’ appetite for riskier assets, including cryptocurrencies.

Coinbase, the largest U.S. cryptocurrency exchange, said its disclosure could lead customers to believe that holding their coins on the platform would be considered “riskier,” which in turn would have a significant impact on their financial health.

“We have no risk of bankruptcy,” Armstrong wrote on Twitter after the disclosure, which he says was made to comply with SEC requirements.

He said it was unlikely “a court would decide to consider client assets part of the company in a bankruptcy proceeding,” although it was still possible.

He said Coinbase will take additional steps to ensure it offers protection for its retail customers.

“We should have updated our retail terms sooner and we did not communicate proactively when this risk disclosure was added,” Armstrong said. “My deepest apologies.”

Cryptocurrency is an unregulated digital currency, not legal tender and is subject to market risks. The information provided in this article is not intended to and does not constitute financial advice, trading advice, or any other advice or recommendation of any kind offered or endorsed by NDTV. NDTV is not responsible for any loss arising from any investment made on an accepted recommendation, forecast or other information contained in this article. Coinbase CEO Brian Armstrong says the disclosure does not indicate bankruptcy risk

Ryan Sederquist

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