Coinbase chief legal officer reacts to SEC disclosure FUD

Coinbase’s chief legal officer, Paul Grewal, emphasized that user funds are legally and physically secured.

As concerns about the Coinbase exchange spread, Coinbase’s chief legal officer, Paul Grewal, reassured users that their funds remain secure within the exchange.

Several parts of a May SEC filing by Coinbase said that in the event of bankruptcy, crypto-assets stored in custody on behalf of customers may be “subject to bankruptcy proceedings” and that users may become “unsecured creditors” in the procedure.

Coinbase disclosed losses of $430 million in the first quarter of 2022, with revenue dropping 27% year over year. To make things worse, the news broke just as Coinbase’s trash bonds started to drop in value.

Coinbase’s chief legal officer addressed and detailed the issue in a blog post published Thursday, as concerns that the company was about to go bankrupt were shared on social media.

Grewal states that the exchange secures customers’ funds “legally and physically.” The firm’s Retail User Agreement was also revised, according to the chief legal officer, to expand institutional clients’ bankruptcy protections to retail investors also.

Grewal further stated that the firm does not operate on the assets of its customers until the users directly ask it to do so. This includes lending or any other commercial activity carried out by traditional banks.

Moreover, the attorney stated in a tweet that the exchange is “financially strong” and has more than $6 billion in the bank, indicating that, despite the “FUD,” it will not go bankrupt very soon.

Brian Armstrong, the co-founder and CEO of Coinbase, spoke up about the matter in May. The CEO highlighted that the firm is at “no risk of bankruptcy” and that the clause was only introduced to comply with a new SEC regulation.