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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

#51

Post by ceejayoz »

core-utility wrote: post #11
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…

> Since coinbase isn’t FDIC insured Coinbase Pro is FDIC insured, makes one wonder why Coinbase itself isn't. https://pro.coinbase.com/?1416

“All USD balances are covered by FDIC insurance”; most people aren’t using them as a USD bank account. Crypto assets aren’t covered by this.

Re: Coinbase warns that bankruptcy could wipe out user funds

#52

Post by toong »

Proven wrote: post #27
maxerickson wrote: post #9

Earlier quoted context omitted.

If you don't have significant liabilities you can't really go bankrupt. (I didn't look to see if that was the case, just making the point in general)

Nonsense. They can get hacked or introduce a bug into their stack and go bust in under an hour. That's extremely unlikely, but not impossible.

Just like it was for all the other crypto brokers that went down, exactly like that ;-)

I might tone it down just a bit to "Somewhat unlikely to happen. Today."

Re: Coinbase warns that bankruptcy could wipe out user funds

#54

Post by duxup »

______-_-______ wrote: post #37

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.

Somehow that’s even less comforting….

But I suppose that’s the rabbit hole crypto fans go down.

Re: Coinbase warns that bankruptcy could wipe out user funds

#57

Post by JumpCrisscross »

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.

> they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations...if they shut it all down, there would be funds left over

Every company that ever went bankrupt had more assets than obligations before they went bankrupt.

Coinbase's quick ratio [1] adjusted for custodial assets, as of 31 March 2022, was 6.6 [2][a]. That's good. Don't adjust for custodial funds, and it's 0.15. Virtually bankrupt. With $6.2bn cash on the balance sheet and $830mm cash burned by operations in Q1, they have over 2 years of runway assuming Q1's terribleness continues. That's good. But were they to suffer a hack, that margin of safety could rapidly collapse. And in that case, customers could be left behind secured lenders. (Where USDC holders would wind up is a mystery.)

[1] https://www.investopedia.com/terms/q/quickratio.asp

[2] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8... page 5

[a] (6,116,388, cash and cash equivalents + 346,048, accounts receivable + 1,333,333, crypto assets held) / (10,921,823, current liabilities - 9,742,961, custodial funds due to customers)

Re: Coinbase warns that bankruptcy could wipe out user funds

#59

Post by pjc50 »

chii wrote: post #31
patrickthebold wrote: post #19

Earlier quoted context omitted.

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).

Check your cloud storage user agreements. A lot of them involve handing a perpetual irrevocable right to the data to the company storing it.

Re: Coinbase warns that bankruptcy could wipe out user funds

#60

Post by gennarro »

______-_-______ wrote: post #37

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.

“There are no risk factors” doesn’t inspire much confidence in me, even if this specific situation isn’t of much concern to Coinbase management.
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