Coinbase's CEO claimed that a statement in the company's most recent quarterly filing did not signal the cryptocurrency exchange operator was facing bankruptcy and was made to comply with a Securities and Exchange Commission (SEC) requirement.
Brian Armstrong made his remarks after Coinbase announced on Tuesday that, in the event of bankruptcy, the exchange's crypto assets might be considered bankruptcy property, and clients could be classed as general unsecured creditors. In any bankruptcy, an unsecured creditor would be the last to be paid and the last in line for claims.
Coinbase, whose stock fell 15% in extended trading on Tuesday, also missed first-quarter sales projections and reported a loss as global market volatility dampened investor interest for higher-risk assets like cryptocurrency.
Coinbase, the largest cryptocurrency exchange in the United States, claimed this disclosure could encourage users to assume that keeping their currencies on the platform is "more hazardous," thus impacting its financial position.
"We have no risk of bankruptcy," Armstrong wrote on Twitter after the disclosure, which he said was made to meet SEC requirements.
He added it was unusual, but not impossible, that "a court would decide to regard consumer assets as part of the corporation in bankruptcy proceedings." He stated that Coinbase would take additional steps to ensure that its retail clients were protected.
"We should have updated our retail terms sooner, and we didn't communicate proactively when this risk disclosure was added," Armstrong said. "My deepest apologies."
(Source:www.bloomberg.com)
Brian Armstrong made his remarks after Coinbase announced on Tuesday that, in the event of bankruptcy, the exchange's crypto assets might be considered bankruptcy property, and clients could be classed as general unsecured creditors. In any bankruptcy, an unsecured creditor would be the last to be paid and the last in line for claims.
Coinbase, whose stock fell 15% in extended trading on Tuesday, also missed first-quarter sales projections and reported a loss as global market volatility dampened investor interest for higher-risk assets like cryptocurrency.
Coinbase, the largest cryptocurrency exchange in the United States, claimed this disclosure could encourage users to assume that keeping their currencies on the platform is "more hazardous," thus impacting its financial position.
"We have no risk of bankruptcy," Armstrong wrote on Twitter after the disclosure, which he said was made to meet SEC requirements.
He added it was unusual, but not impossible, that "a court would decide to regard consumer assets as part of the corporation in bankruptcy proceedings." He stated that Coinbase would take additional steps to ensure that its retail clients were protected.
"We should have updated our retail terms sooner, and we didn't communicate proactively when this risk disclosure was added," Armstrong said. "My deepest apologies."
(Source:www.bloomberg.com)
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