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Coinbase bankruptcy wording triggers warnings to move crypto off exchanges

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Coinbase bankruptcy wording triggers warnings to move crypto off exchanges

Coinbase › Exchanges

Worse than expected earnings send Coinbase shares tumbling. What’s more, eagle eyed investors noticed bankrupcy wording setting off red flags to move funds off the exchange.

2 min read

Updated: May 11, 2022 at 12:54 pm

Cover art/illustration via CryptoSlate

On May 10, crypto exchange Coinbase released its Q1 2022 earnings report doing little to calm choppy market conditions.

It showed net revenue down 53% from the previous quarter, to $1.165 billion, and a net loss of $430 million. Mizuho Analyst Dan Dolev attributed this to falling trading volume due to the early arrival of crypto winter.

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“Crypto winter has come early, and temperatures are dropping fast.”

Shares in the largest US exchange dropped 44% on the day as investors came to terms with the worse than expected performance.

Coinbase made its Nasdaq debut in April 2021. Its mainstream TradFi arrival was supposed to herald a new era, achieving a first-day closing price of $328.28. But more than a year later, $COIN is trading 78% down from its debut closing price.

Source: google.com

What’s more, some investors were surprised to discover a bankruptcy disclosure statement in the report. It states customers could be treated as unsecured creditors, meaning they may not get their funds back should the firm go bust.

What’s this about bankruptcy?

Crypto Underwriter at Relm Insurance, Sophia Zaller, drew attention to the bankruptcy disclosure, calling it a red flag. She signed off the tweet warning Coinbase users to move their funds off the exchange.

The specific wording said customers’ funds might be thought of as the property of a bankrupt estate. Should the firm go bankrupt, those funds could be subject to bankruptcy proceedings and, therefore, this may classify customers as unsecured creditors.

“custodially held crypto assets may be considered the property of a bankrupt estate, in the event of bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and as such customers could be treated as our general unsecured creditors.”

In the event of a firm going bankrupt, entities owed money are paid in a particular order per Section 507 of the Bankruptcy Code. First in line are secured creditors, next are unsecured creditors, and stockholders are last.

Is Coinbase too big to fail?

Last crypto winter was characterized by a plethora of crypto firms going bust under the harsh trading conditions.

The most prominent example was Coinnest, which was South Korea’s third-largest exchange. Coinnest issued a statement that said its closure was the natural result of the drop-off in trading volume.

With Coinbase’s trading volume down 40% in the first quarter, the warning signs are there. But then again, is Coinbase too big to fail?

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Crypto exchange FTX expands into US stock trading

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Crypto exchange FTX expands into US stock trading

U.S.› FTX › Exchanges

FTX launches its US equities trading service, accepting payments in both stablecoins and US dollars.

2 min read

Updated: May 19, 2022 at 9:39 pm

Cover art/illustration via CryptoSlate

FTX exchange is expanding into US equity trading with its subsidiary FTX US. FTX has launched its US equities trading service, accepting payments in Stablecoins and US dollars.

With this news, a select group of waitlisted US retail investors can fund their accounts with Stablecoins like USDC via the FTX US crypto exchange. FTX Chief Executive Sam Bankman-Fried released details of the news on his Twitter feed today:

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1) Beta for stocks on FTX US opening today!https://t.co/y5FgA2Fw2y

— SBF (@SBF_FTX) May 19, 2022

The announcement comes a week after the Billionaire founder acquired a 7.6% stake in Robinhood. Shares of Robinhood Markets rose sharply by 23% last week after the FTX Chief revealed that it had taken a stake in the trading platform.

As said by Brett Harrison, FTX US President,

“Our goal is to offer a holistic investing service for our customers across all asset classes. With the launch of FTX Stocks, we have created a single integrated platform for retail investors to easily trade crypto, NFTs, and traditional stock offerings through a transparent and intuitive user interface  

Speaking of the move in an exclusive with the Wall Street Journal, he added,

“We would like to become the ‘everything exchange’ and the ‘everything app’ when it comes to financial services

A new retail investment experience

Last week, Financial Times reported that several Wall Street brokers warned US regulators about FTX’s plans to automate risk management. The technology would radically disrupt traditional trading approaches. The FTX automated process could mean that computers would replace many functions currently performed by brokers. 

The no-fee brokerage accounts and commissionless trading will be attractive to the ready-made retail crypto market, familiar with this kind of trading. Not only does it offer transparency, but it eliminates the need for many of the standard broker services offered in traditional investing experiences today.

Last week, FTX CEO Sam Bankman-Fried made the headlines for his critique of Bitcoin as a form of payment. In an interview with the Financial Times, he argued that the Bitcoin Network is not scalable, noting that Proof of stake networks are more energy efficient.

Earlier this year, FTX was valued at $32 billion after it raised $400 million in a Series C funding round.

From today, US clients that joined a waiting list in February will be able to buy stocks and exchange funds on the platform. 

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Crypto Exchange Coinbase Slows Hiring Amid Market Downturn

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Crypto Exchange Coinbase Slows Hiring Amid Market Downturn

Leading U.S. crypto exchange Coinbase is slowing hiring, citing the current down cycle in the market as a reason to rethink its staffing strategy. The company’s management believes the move will allow the trading platform to match its hiring needs with its business goals.

Coinbase to Reassess Headcount Needs, Focus on Integrating Recent Hires

Cryptocurrency exchange Coinbase has announced a change in its staffing plans. After previously aiming to triple its size heading into this year, the company now feels it’s prudent to slow hiring and reassess its personnel needs against its business goals, given the current market conditions. Quoted in a press release on Tuesday, Coinbase President and Chief Operating Officer Emilie Choi explained:

To ensure we’re best positioned to succeed during and after the current market downturn, we’re announcing we’re slowing hiring so we can reprioritize our hiring needs against our highest-priority business goals.

Choi further elaborated that Coinbase had made the decision in order to emerge stronger from this down cycle. She emphasized the step is part of managing the business to the scenarios the company had planned for, and assured the changes will not affect its expense outlook for the second quarter and the whole of 2022.

The digital asset exchange now intends to focus on integrating its recent hires and becoming more rigorous in determining its priorities. “We know this is a confusing time and that market downturns can feel scary,” the top executive noted while pointing out that the company has been through other, similar challenges in the past.

Choi’s announcement comes after Coinbase revealed in its earnings report earlier in May that it holds $256 billion in fiat and crypto assets on behalf of its customers. It also admitted that if the company declared bankruptcy, its users can potentially lose access to the crypto funds in their accounts as these could be subject to bankruptcy proceedings.

Tags in this story

Coinbase, Crypto, crypto company, crypto exchange, Cryptocurrencies, Cryptocurrency, Decision, Exchange, hires, Hiring, intentions, market, Market Downturn, personnel, plan, slowdown, staff, U.S., US

Do you expect other major crypto companies to reconsider their hiring plans? Tell us in the comments section below.

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Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Coinbase to slow hiring and expansion due to market downturn

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Coinbase to slow hiring and expansion due to market downturn

Coinbase › Exchanges

The U.S. exchange is struggling to maintain its projected growth as its earnings dropped alongside the wider market.

2 min read

Updated: May 18, 2022 at 8:01 am

Cover art/illustration via CryptoSlate

Coinbase announced today that it will slow its hiring process this year and reassess its headcount as it struggles with the market downturn.

Emilie Choi, the president and COO of Coinbase, said that the company wants to focus on other business goals it deems to be of the “highest priority.”

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Coinbase won’t be tripling its headcount

The current market volatility has affected everyone in the industry, and not even its most prominent players have remained immune to the chilling conditions. Coinbase, the largest cryptocurrency exchange in the U.S., took a heavy hit when the markets went red and will be taking a step back from its expansion plans.

Coinbase’s president and COO Emilie Choi said that the company will be slowing hiring in an update to employees. Choi explained that the company decided to prioritize its resources.

In April, Coinbase announced plans to triple the company’s size and take on a more significant part of the global market, most notably India. This was in line with the company’s plans from earlier in the year when they announced they will be hiring over 2,000 employees globally.

Brian Armstrong, the CEO of Coinbase, said that half of those employees will come from India, where the exchange planned on setting roots this spring.

However, regulatory uncertainty in the country, last quarter’s significant loss in revenue, and a broader market downturn forced the company to reevaluate its expansion strategy and slow down its hiring efforts.

The company also said that it will be “reassessing its headcount,” but failed to reveal further details as to whether or not it will be laying off employees.

“Headcount growth is a key input to our financial model, and this is an important action to ensure we manage our business to the scenarios we planned for,” Choi said in the company’s update to employees.

Instead, the company will focus on fully integrating all recent hires and prioritizing its operations.

Choi noted that while market downturns can feel scary to users and investors, the company already has plans in place for every market scenario—and this is no exception.

“We plan for all market scenarios, and now we are starting to put some of those plans into practice. We’re in a strong position — we have a solid balance sheet and we’ve been through several market downturns before, and we’ve emerged stronger every time.”

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