CEO of Coinbase Brian Armstrong recently reassured investors that the crypto exchange is not facing bankruptcy risks amid concerns about the company’s latest 10-Q form.
Form 10-Q, submitted by Coinbase to the US Securities Exchange Commission (SEC) on Tuesday, conveyed a ‘bankruptcy risk factor’ statement stating that crypto assets held by the exchange for its users could be subject to bankruptcy proceedings in the event of business failure.
“Since held crypto assets may also be considered the property of a bankruptcy estate, crypto assets that we hold in custody on behalf of our clients in the event of a bankruptcy may also be included in bankruptcy proceedings and thus clients may be subject to lawsuits.
This will naturally make our custody services more risky and less attractive. In such a situation, it is not possible for us to increase our customers and retain existing customers using our platform and/or products. Such a scenario will naturally threaten the continuity of our business.”
In response to concerns raised by the content of the 10-Q form, Armstrong told his Twitter followers. CoinbaseHe said the company is not on the verge of any financial collapse and the statement was added in accordance with a new SEC requirement.
“There has been quite a bit of noise today about a statement we made about how we held crypto assets in Q10. If you don’t have time to read the topic, I can summarize it as follows, your money will stay safe on Coinbase as always.
We do not have any bankruptcy risk, but we had to add a new risk factor based on the SEC requirement called SAB 121, a new mandatory disclosure for public companies with crypto assets for third parties.”
The Coinbase CEO also explains the importance of bankruptcy risk factor disclosure.
“This statement is quite plausible as these legal protections have not been specifically tested in court for crypto assets and it is possible but unlikely that the court will decide to consider client assets in bankruptcy proceedings as part of the company, even if damaged.”
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.