Due to fears surrounding the Coinbase exchange, Coinbase Chief Legal Officer Paul Grewal assured customers that their funds are safe within the exchange.
In an SEC disclosure made by Coinbase in May, certain Parts The document mentions that in case of bankruptcy, custodial crypto-assets on behalf of its clients may be “subject to bankruptcy proceedings” and clients may become “unsecured creditors” in the process.
The disclosure came under the spotlight after Coinbase reported a loss of $430 million in the first quarter of 2022 and saw a 27% drop in revenue compared to the previous year. To make matters worse, the news was right on the move when Coinbase’s junk bonds also started going down in value.
Company can go as feelings bankrupt Circulating on social media, the chief legal officer of Coinbase clarified and explained the situation in a blog post published on Thursday.
According to Grewal, the exchange is “legally and physically” protecting clients’ funds. The chief legal officer said the firm has also updated its retail user agreement to extend the bankruptcy protection of institutional clients to retail investors.
Grewal also pointed out that the firm does not take any action with the assets of its clients unless the user specifically instructs to do so. This involves using the money for lending or any other commercial activities that traditional banks do.
There has never been a serious question whether on property @ coinbase are safe. We have over $6B in the bank, are financially sound, and have legal and operational security for customers to invest in, access, and withdraw their crypto.— paulgrewal.eth (@iampaulgrewal) 1 June 2022
In addition, the lawyer also highlighted in a Tweet That the exchange is “financially strong” and has more than $6 billion in the bank, which means it is not going bankrupt anytime soon, despite the “FUD”.
related: Data Shows Wealthy Coinbase Clients Are Still ‘Holding’ Bitcoin Since December 2020
Back in May, Brian Armstrong, co-founder and CEO of Coinbase, also commented on the issue. The CEO underlined that the firm has “no risk of bankruptcy” and only added the clause because of a new SEC requirement. It has strong legal protections for its users in any event, he added.