Coinbase Has No Risk of Bankruptcy, New 10-Q Disclosure Language Is SEC Requirement, CEO Armstrong Says

The new language points out that customers could be treated as general unsecured creditors if there ever were to be such proceedings.

AccessTimeIconMay 11, 2022 at 4:45 a.m. UTC
Updated May 11, 2022 at 7:52 p.m. UTC

Coinbase (COIN) founder and CEO Brian Armstrong said in a tweet Wednesday that new language found in the exchange's latest 10-Q filing is simply a new requirement of the U.S. Securities and Exchange Commission, and that Coinbase is in no danger of bankruptcy.

  • Armstrong said the exchange had "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."
  • The 10-Q, filed with the SEC Tuesday, says: "Because custodially [sic] 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," Coinbase wrote in its recent filing.
  • Coinbase also disclosed the new language means customers may believe keeping their coins on the platform would be considered "more risky," which would in turn materially impact its financial position.
  • In the event of bankruptcy, general unsecured creditors would be considered having the most to lose because they are last in line for claims.
  • "We believe our Prime and Custody customers have strong legal protections in their terms of service that protects their assets, even in a black swan event like this," Armstrong wrote in the tweet. "This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically."
  • Caitlin Long, founder and CEO of digital asset bank Custodia Bank (formerly known as Avanti), said in a tweet that this provision isn’t new and is an inherent problem with the regulatory structure used by most custodians.
  • "Wyoming addressed this by creating a new customer-friendly structure designed to respect segregation of customer assets in bankruptcy, the Wyoming special-purpose depository institution," she said.
  • Coinbase stock is trading at $72, down 70% year to date.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.


CoinDesk - Unknown
Three Arrows Paper Trail Leads to Trading Desk Obscured Via Offshore Entities

As Three Arrows Capital collapsed under market pressure, its much-lesser known trading desk, TPS Capital, remained active, sources say. But a complex ownership structure might frustrate creditors' efforts to collect.

CoinDesk - Unknown
CoinDesk - Unknown
June Was Bitcoin’s Worst Month Ever

Plus, European crypto regulation comes into view.

CoinDesk - Unknown
CoinDesk - Unknown
What Traders Are Saying About Bitcoin's Biggest Monthly Loss in 11 Years

Poor macroeconomic sentiment, fears of inflation and systemic risks from the crypto market pushed the cryptocurrency below 2017’s highs.

CoinDesk - Unknown
CoinDesk - Unknown
Three Arrows Capital Files for Bankruptcy in New York Tied to British Virgin Islands Proceeding

A British Virgin Islands court ordered Three Arrows' BVI branch into liquidation earlier this week.

CoinDesk - Unknown