As fears around the Coinbase exchange run rampant, Paul Grewal, the firm’s chief legal officer, assured clients that their funds are safe within the exchange.
In an SEC statement made by Coinbase in May, parts of the document mentioned that, in the event of bankruptcy, crypto assets held in escrow on behalf of its clients could be “subject to bankruptcy proceedings” and that clients could become “unsecured creditors” in the process.
The revelation came to the fore just after Coinbase reported its losses for the first quarter of 2022, which amounted to $430 million, and showed a revenue decline of 27% compared to the previous year. To make matters worse, the news trended just as Coinbase junk bonds also began to drop in value.
While feelings that the company might go bankrupt circulated on social media, Coinbase’s chief legal officer clarified and explained the situation in a blog post published on Thursday.
According to Grewal, the exchange protects customer funds both “legally and physically.” The legal director noted that the firm has also updated its Retail User Agreement to extend bankruptcy protections from institutional clients to retail investors as well.
There’s never been a serious question that assets on @coinbase are safe. We have more than $6B in the bank, are financially strong, and have legal and operational protections for customers to invest, access, and withdraw their crypto.
— paulgrewal.eth (@iampaulgrewal) June 1, 2022
It has never been seriously questioned that the assets in @coinbase are safe. We have over $6 billion in the bank, we are financially strong, and we have legal and operational protections for customers to invest, access, and withdraw their cryptocurrencies.
Also, lawyer highlighted in a tweet that the exchange is “financially strong” and has over $6bn in the bank, implying that it will not go bankrupt anytime soon despite “FUD” (fear of missing out on potential profits).
In May, Brian Armstrong, the co-founder and CEO of Coinbase, also commented on the matter. The CEO stressed that the firm “has no bankruptcy risk” and simply added the clause due to a new SEC requirement. He pointed out that there are strong legal protections for its users in any case.
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