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The Coinbase chief legal officer said that customers’ funds are safe with the company and will always be.
Paul Grewal, Coinbase chief legal officer, has assured customers that their funds are safe with the exchange after the SEC uncertainty disclosure last month. In May, an SEC disclosure made by Coinbase revealed that the customer’s crypto assets in the exchange’s custody may be subject to bankruptcy proceedings. The disclosure reads:
“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.”
The statement followed the announcement of Coinbase’s 2022 Q1 earnings result. Meanwhile, the company reported losses of around $430 million and a 27% revenue drop YoY. Unfortunately, the disclosure also came into the limelight amid the trending news of the exchange’s declining junk bonds. These unpleasant updates sent tremors across customers of the crypto company, especially people who have assets with the exchange. This made Grewal publish a press release to set “the record straight.”
Coinbase Assures Customers in Wake of SEC Disclosure
The Coinbase chief legal officer assured us that customers’ funds are safe with the company and will always be. He explained that Coinbase maintains internal systems and tracks account activities in real-time. According to him, customer funds can never confuse with corporate assets. Speaking further, Grewal stated that Coinbase does not repurpose funds. The company does not take any actions with assets in care outside the owners’ directives. In the press release, the executive boasted that Coinbase holds customers’ assets 1:1, unlike “many banks and financial institutions” that use “customer funds for commercial purposes including lending and trading, meaning that they often hold only a fraction of their customer assets at any given time.”
The chief legal officer said Coinbase had clarified its Retail User Agreement in response to the SEC disclosure. This refers to consumers’ legal protection for both individual and institutional clients. Clients rely on this Retail User Agreement as protection in case of a custodian bankruptcy.
Finally, Grewal pleaded with Coinbase consumers, hoping that the highlights came with relief. He said:
“We apologize for the confusion around the disclosure. Even though it was in response to guidance applicable to any publicly traded crypto custodian from an important regulator, it caused unnecessary uncertainty and anxiety. The crypto space is a dynamic one, and we will always seek to use the best structure to ensure that our clients’ assets are managed in the safest way possible.”
Coinbase became the first crypto company to enter the Fortune 500, according to the 2022 Fortune 500 list. Fortune magazine ranked the company 437th largest US corporation by total revenue. Coinbase has been declining over the past year, losing almost 68%.