The cryptocurrency exchange included a new disclosure to its customers in its first-quarter earnings report earlier this week.
"Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors”, the warning states.
This is a statement Coinbase needed to make because of a requirement made by the US Securities and Exchange Commission, which said these disclosures are necessary so customers are informed about their investments. Founder and chief executive of Coinbase Brian Armstrong took to Twitter to reassure customers that the company was not at risk of bankruptcy.This content is not available due to your privacy preferences.“We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties.
“This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically, and it is possible, however unlikely, that a court would decide to consider customer assets as part of the company in bankruptcy proceedings even if it harmed consumers.”