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Coinbase's 10-Q update: users' crypto asset could be subject to bankruptcy claim
- panda88888 4y agoWhat about the cash balance? Is it also subject to seizure if Coinbase goes bankrupt?
- smokey_circles 4y ago... obviously? It's an asset (for some reason). That's what happens to assets when you file bankruptcy. What do you think happens when a bank collapses? Your money is magically protected?
- affyboi 4y ago> What do you think happens when a bank collapses? Your money is magically protected? https://www.fdic.gov/ https://www.fdic.gov/
- uejfiweun 4y agoWow. I feel like this is the sort of thing that could precipitate a run.
- daenz 4y agoPage 83[0] 0. https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d81-41a2-4a3c-86fb-b4067ab1016c.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001679788/89c60d8...
- fullshark 4y ago> As of March 31, 2022, we held $256 billion in custodial fiat currencies and cryptocurrencies on behalf of customers. Supported crypto assets are not insured or guaranteed by any government or government agency. We have also entered into partnerships with third parties, such as with the Centre Consortium, as a reseller of USDC, where we or our partners receive and hold funds for the benefit of our customers. ... > Any failure by us or our partners to maintain the necessary controls or to manage customer crypto assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, litigation, regulatory enforcement actions, significant financial losses, lead customers to discontinue or reduce their use of our and our partners’ products, and result in significant penalties and fines and additional restrictions, which could adversely impact our business, operating results, and financial condition. Moreover, 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. This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition.
- alligatorplum 4y agoWould this also apply to other crypto exchange platforms like Binance and Kraken? or is this something only applicable to Coinbase?
- aaaaaaaaata 4y agoIn all cases, you're wholly liable to whomever holds the private keys to the wallet that holds the tokens.
- schemescape 4y agoThis seems to align with an article that appeared on HN about 3 months ago: https://news.ycombinator.com/item?id=30229324 https://news.ycombinator.com/item?id=30229324 > Custodially Held Crypto Currency Is Likely Property of the Bankruptcy Estate
- klyrs 4y agoI truly don't understand why people are so upset about this. If you're claiming bankruptcy but sitting on a fat crypto wallet, why should it not be subject? Your bank isn't going to hide assets for you, why would any other legitimate business?
- xiphias2 4y agoThe difference is like storing money in a physical safe where you still own the values, vs on a bank account where you are a creditor. People would prefer to store crypto in the first type of institution.
- daenz 4y agoThis isn't about an individual declaring bankruptcy. It's about Coinbase declaring bankruptcy, and users' wallets being used to pay Coinbase's debts. That's why people are upset.
- cowvin 4y agoYes, but it's not as weird as it sounds. It says the users are creditors as well so using the users' accounts to pay the users is not particularly strange.
- daenz 4y agoSpecifically, it says "unsecured creditors" who get paid after debts to secured creditors. The "credit" is the contents of their wallets.
- UncleEntity 4y agoSure, why would anyone invest in them if they weren’t sure they’d get paid out first when things go bad? Kind of like the banks back in ‘09 making their depositors take a haircut to ensure the bank didn’t go under. Nobody really complained because it was the offshore banks where oligarchs and such hide their money and they received ‘ownership’ in return for them stealing their deposits.
- pbamotra 4y agohttps://twitter.com/brian_armstrong/status/1524233480040710144 https://twitter.com/brian_armstrong/status/15242334800407101...
- chii 4y agoi wonder if coinbase is subject to rehypothecation https://www.investopedia.com/terms/r/rehypothecation.asp https://www.investopedia.com/terms/r/rehypothecation.asp
- darkteflon 4y agoPeople are really surprised by this? You should definitely assume that crypto exchanges and other crypto intermediaries of all stripes do not hold your crypto in a bankruptcy-remote structure.
- Ekaros 4y agoNot solely your keys, not your coins... After Mt. Gox it should be clear to anyone that unless you hold your own coins on your own you don't really guarantee them.
- Melting_Harps 4y agoAs said many times: Not your keys, not your coins!