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Coinbase warns that bankruptcy could wipe out user funds

fortune.com

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Re: Coinbase warns that bankruptcy could wipe out user funds

#31

Post by chii »

patrickthebold wrote: post #19
prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

I'm not familiar with how any of this works, but I kind of thought coinbase was less like a bank—paying interest on deposits—and more like a user friendly web ui for managing your assets, because dealing with private keys is hard for a user. If, for example, Dropbox declares bankruptcy I'd be shocked if creditors could search through the user data for things of value. It seems like there would be plenty of money to b…

> I'd be shocked if creditors could search through the user data for things of value.

dropbox don't own any copyright to the content from the user's uploads. So even if the creditors find any valuable IP or content, there's no way they can claim ownership over it.

Coinbase, on the other hand, is given custody of actual assets (the cryptos).

Re: Coinbase warns that bankruptcy could wipe out user funds

#32

Post by ergonaught »

skilled wrote: post #21

Wait, can someone explain to me why they would explicitly announce it like this? This almost sounds like they're expecting to go bankrupt, or have plans to close the platform. In the last 7 days they have lost over 50% value, and dropping a news bomb like this is only going to make it worse, isn't it?

I'm sure someone could. To quote, "In comments shared on Twitter, Coinbase CEO and founder Brian Armstrong said the exchange had "no risk of bankruptcy," and that the disclosure was made due to new rules set by the U.S. Securities and Exchange Commission regarding public companies that hold crypto assets on behalf of others."

Re: Coinbase warns that bankruptcy could wipe out user funds

#33

Post by riffraff »

patrickthebold wrote: post #19
prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

I'm not familiar with how any of this works, but I kind of thought coinbase was less like a bank—paying interest on deposits—and more like a user friendly web ui for managing your assets, because dealing with private keys is hard for a user. If, for example, Dropbox declares bankruptcy I'd be shocked if creditors could search through the user data for things of value. It seems like there would be plenty of money to b…

they do both, you can earn interest on some things within coinbase, e.g. 4% interest on USDC (their stablecoin)

Re: Coinbase warns that bankruptcy could wipe out user funds

#34

Post by onlyrealcuzzo »

skilled wrote: post #21

Wait, can someone explain to me why they would explicitly announce it like this? This almost sounds like they're expecting to go bankrupt, or have plans to close the platform. In the last 7 days they have lost over 50% value, and dropping a news bomb like this is only going to make it worse, isn't it?

Is something amiss with USDC?

If it's even partially backed by other cryptos, it could implode pretty soon.

Re: Coinbase warns that bankruptcy could wipe out user funds

#35

Post by WJW »

maxerickson wrote: post #14
IfOnlyYouKnew wrote: post #12

Earlier quoted context omitted.

They just posted a quarterly loss of $430 million.

Okay, but that isn't a liability in an accounting sense, it is a cash flow. Edit: looking at the 10K, other than customer assets (where they have a net holding), they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations). So if they shut it all down, there would be funds left over.

Would that be 5 billion in customer assets and associated liabilities, leaving about 1 billion of equity for Coinbase? At a burn rate of 430 million per quarter that only leaves a runway about 7-8 months.

Re: Coinbase warns that bankruptcy could wipe out user funds

#36

Post by eatonphil »

nradov wrote: post #24
eatonphil wrote: post #4

Earlier quoted context omitted.

I do wonder why he's allowed to say on Twitter there is no risk of bankruptcy [0]. While the risk could be minimal and maybe negligible saying "no risk" means zero chance. That can't be true of any company. For a public company ceo to say that, isn't that securities fraud? I guess even if it is fraud and they do get prosecuted by the SEC they'd just get fined for it. And maybe the fine here would be much less than th…

The SEC can't prosecute anyone, they have no criminal enforcement power. However they can bring civil actions for fraud or other violations of securities law, and refer criminal fraud cases to the Justice Department.

Thanks for the clarification, makes sense.

Re: Coinbase warns that bankruptcy could wipe out user funds

#37

Post by ______-_-______ »

https://nitter.net/brian_armstrong/status/152423348004071014...

In other words: We only disclosed these risk factors because we were legally required to. Please ignore our SEC disclosure and half-billion dollar quarterly loss, and instead trust my unregulated statements posted on Twitter. There are no risk factors, your money is safe, the music will never stop.

Re: Coinbase warns that bankruptcy could wipe out user funds

#38

Post by luciusdomitius »

skilled wrote: post #21

Wait, can someone explain to me why they would explicitly announce it like this? This almost sounds like they're expecting to go bankrupt, or have plans to close the platform. In the last 7 days they have lost over 50% value, and dropping a news bomb like this is only going to make it worse, isn't it?

3 months ago J Powell (of Kraken, not Fed lol) adviced his users not to keep their crypto on his exchange[0]. Not the best business move either. A possible explanation might be provided here: https://twitter.com/jespow/status/1498112744754606081

0. https://twitter.com/jespow/status/1494462097161220104?lang=e...

Re: Coinbase warns that bankruptcy could wipe out user funds

#39

Post by maxerickson »

WJW wrote: post #35
maxerickson wrote: post #14

Earlier quoted context omitted.

Okay, but that isn't a liability in an accounting sense, it is a cash flow. Edit: looking at the 10K, other than customer assets (where they have a net holding), they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations). So if they shut it all down, there would be funds left over.

Would that be 5 billion in customer assets and associated liabilities, leaving about 1 billion of equity for Coinbase? At a burn rate of 430 million per quarter that only leaves a runway about 7-8 months.

No, I left custodial holdings out of those numbers.

The dead reply to my comment at the top of the thread makes a good point that loss of the custodial holdings in a hack would bankrupt them.

Re: Coinbase warns that bankruptcy could wipe out user funds

#40

Post by seaourfreed »

prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

If this was a brokerage with stocks, the customers own those stocks. There is no reason crypto shouldn't be the same. There is no reason crypto shouldn't have top priority to their owners. It isn't okay for a company to put other creditors above the owners of that crypto
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