Key Takeaways:
- Coinbase CEO Brian Armstrong says they have no risk of bankruptcy.
- Armstrong assured that investors’ funds were safe even during the ‘black swan event.
- He explained in a tweet, that they did include a new risk factor based on SEC requirement SAB 121.
Brian Armstrong stated in a tweet that the company is not in danger of going bankrupt anytime. He reassured all its investors that their assets would be safe with Coinbase as it has always been.
Armstrong also clarified that all they did was they basically included a new risk factor based on an SEC requirement known as SAB 121. Now SAB121 is a new mandatory disclosure for public firms that handle crypto-assets for third parties.
Brian Armstrong’s remarks came shortly after Coinbase announced Tuesday that, in the event of bankruptcy, the exchange’s crypto assets may be classified as general unsecured creditors should it file for bankruptcy. Unsecured creditors are the last to be paid and the last in line for claims in a bankruptcy.
On Tuesday, Coinbase announced its first-quarter earnings. A 15 percent drop in Coinbase’s share price occurred in after-hours trading. In Q1 ’22, the company recorded a net loss of $430 million. Retail monthly transaction users (MTUs) fell from 11.4 million in 2021 to 9.2 million in 2022.
Coinbase appears unconcerned with its long-term prospects. Since the crypto industry is volatile, the crypto exchange warned shareholders that the stock should be viewed as a long-term investment. It stated in its shareholder letter, “We believe these market conditions will not last, and we remain committed to the long term.”
Another filing stated that its customers would be regarded as “general unsecured creditors” in the event of bankruptcy. Essentially, they will be asked to contribute cryptocurrency to the company’s bailout. This created havoc everywhere. Nevertheless, the firm’s CEO defended the company, claiming the firm only had to meet SEC’s SAB 121 requirements and there was no risk of bankruptcy.
