Coinbase new disclosure does not mean firm faces bankruptcy risk, says CEO

Reuters

Published May 11, 2022 03:20AM ET

Updated May 11, 2022 06:31AM ET

(Reuters) -Coinbase chief executive said a disclosure in its latest quarterly filing did not indicate the largest U.S. cryptocurrency exchange faced a bankruptcy risk, and it had been made to meet a regulatory requirement.

Brian Armstrong's comments on late Tuesday came after the company said 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 unsecured creditors.

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

Coinbase (NASDAQ:COIN) said its disclosure might lead customers to believe that keeping their coins on the platform would be considered "more risky", which would in turn materially impact its financial position.

"We have no risk of bankruptcy," Armstrong said https:// on Twitter (NYSE:TWTR) after the disclosure. He said it was unlikely that "a court would decide to consider customer assets as part of the company in bankruptcy proceedings" although it was still possible.

Coinbase would take further steps to ensure it offered protection for its retail customers, Armstrong said.

"We should have updated our retail terms sooner, and we didn't communicate proactively when this risk disclosure was added," he said. "My deepest apologies."