Paul Grewal, the chief legal officer at Coinbase, has stressed that the customer’s funds are secured legally and physically.
The fears about the Coinbase exchange rage; Paul Grewal, the Chief Legal Officer of Coinbase, promised customers that secured their money in the exchange.
In an SEC announcement made by Coinbase in May, certain sections in the disclosure stated it was possible that, in the event of bankruptcy, the crypto-assets that are stored in custody for customers could become “subject to bankruptcy proceedings”, and customers could become “unsecured creditors” in the procedure.
The news came into the spotlight just after Coinbase announced its losses for the first period of the year 2022 totalling $430 million, and an increase in revenue of 27% compared to the prior year. And to make matters worse, the news trended in the right direction as the junk bonds issued by Coinbase decreased to a lesser extent.
While rumours that the company could go into bankruptcy circulated through social media, the company’s chief legal officer clarified and explained the issue on a blog published on Thursday.
According to Grewal, the exchange safeguards clients’ money “legally and physically.” The chief Legal Officer pointed out that the company also revised the Retail User Agreement to extend protections against bankruptcy for institutional customers to retail investors too.
Grewal further explained that the firm doesn’t take any action on its clients’ assets unless the customers expressly request this. This involves using the funds for lending or other commercial activity carried out by traditional banks.
Additionally, the attorney also stated on Twitter that the company has been “financially strong” and has more than $6 billion of assets in the bank, suggesting it won’t go bankrupt shortly, despite being a victim of “FUD.”
In April, Brian Armstrong, the co-founder and CEO of Coinbase, was also a voice about the issue. The CEO emphasized that the company has “no risk of bankruptcy” and added the clause in response to the latest SEC requirements. He pointed out that there are legal security measures for users in all eventualities.
