Coinbase CEO says everything's OK after SEC filing gives netizens the jitters

OK includes an outage, plummeting cryptocurrencies, falling stock price


Coinbase CEO Brian Armstrong has scrambled to alleviate fears that customers storing cryptocurrencies at the digital cash exchange will lose everything if the biz goes under.

This concern stemmed from Coinbase's quarterly 10-Q report [PDF] filed this month to the SEC. It disclosed that customers who kept their cryptocurrencies at the exchange could see their assets seized in the event the business went bankrupt, thus:

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.

Cue consternation. According to the chief exec this week, this language had to be included due to a recently added SEC requirement, SAB 121, regarding the safeguarding of cryptocurrency assets. And don't forget, SEC filings have to include worst-case scenarios so that investors can't say they weren't warned if things go belly-up.

Armstrong insisted "your funds are safe at Coinbase, just as they've always been." Armstrong went on to say that some of Coinbase's customers – its Prime and Custody users – have always had legal protections in place to prevent their assets being seized in a bankruptcy, though that hasn't applied to retail users.

"We're taking further steps to update our user terms such that we offer the same protections to those customers in a black swan event. We should have had these in place previously, so let me apologize for that," Armstrong tweeted. 

Armstrong's tweet-stream was followed by a statement the next day on Coinbase's website making many of the same claims and stressing that the company wasn't in danger of bankruptcy. 

Some folks weren't reassured, and the situation wasn't helped on Thursday when the site went down for about two hours, blocking transactions. This also came as the prices of cryptocurrencies crashed in general: for instance, the popular Luna went from about $120 apiece last month to $0.00005 today, down essentially 100 percent.

"The underlying issue that caused difficulties is resolved and full service has been restored," the biz said. "We recognize these times can be frustrating, and we remain vigilant to ensure our services remain top-notch."

The fear isn't coming from nowhere

Coinbase has been a public company for a little over a year, and since its stock opened at $381 it's mostly lost value, finally plunging below $100 on May 4.

It tanked further on May 11, the day after Armstrong's tweets, when Coinbase's quarterly earnings statement was released, reporting a $430 million loss in the first quarter of 2022. Shares fell sharply after the report, dropping as low as $43 before rebounding to around $58 at the close of Thursday trading.

Coinbase is not alone in seeing its stock price nosedive. Falls in tech industry valuations that began last week have wiped more than $1 trillion from stock prices in the sector, and Apple is no longer the world's most valuable business, having been eclipsed by oil giant Saudi Aramco on Wednesday.

Gartner distinguished VP analyst Mark McDonald said in a blog post about the ongoing tech-sector turmoil that, while losses are being reported and stocks are becoming volatile, it doesn't reflect the reality of the business tech industry. "Investors buy on the rumor and then sell on the news," McDonald said. 

The business-to-consumer (aka B2C) side of things is where losses are happening, he said, and with good reason: they had a huge boom cycle thanks to the pandemic and now the world is returning to normal. 

According to McDonald, "some of that run up is running off in the face of higher interest rates, inflation, and the return to other forms of entertainment, shopping etc. Compared to the pandemic past and considering the inflationary future, these firms were bound to come off their pandemic highs."

On the B2B side, the losses aren't there, according to Gartner's forecasts, which predict B2B tech spending to total $4.4 trillion this year, a four percent year-over-year increase.

"Business spending and investment in technology gets underplayed in the face of simple stories about a few big FANG companies," McDonald opined, referring to Facebook, Amazon, Netflix, and Google. ®


Other stories you might like

  • Stolen university credentials up for sale by Russian crooks, FBI warns
    Forget dark-web souks, thousands of these are already being traded on public bazaars

    Russian crooks are selling network credentials and virtual private network access for a "multitude" of US universities and colleges on criminal marketplaces, according to the FBI.

    According to a warning issued on Thursday, these stolen credentials sell for thousands of dollars on both dark web and public internet forums, and could lead to subsequent cyberattacks against individual employees or the schools themselves.

    "The exposure of usernames and passwords can lead to brute force credential stuffing computer network attacks, whereby attackers attempt logins across various internet sites or exploit them for subsequent cyber attacks as criminal actors take advantage of users recycling the same credentials across multiple accounts, internet sites, and services," the Feds' alert [PDF] said.

    Continue reading
  • Big Tech loves talking up privacy – while trying to kill privacy legislation
    Study claims Amazon, Apple, Google, Meta, Microsoft work to derail data rules

    Amazon, Apple, Google, Meta, and Microsoft often support privacy in public statements, but behind the scenes they've been working through some common organizations to weaken or kill privacy legislation in US states.

    That's according to a report this week from news non-profit The Markup, which said the corporations hire lobbyists from the same few groups and law firms to defang or drown state privacy bills.

    The report examined 31 states when state legislatures were considering privacy legislation and identified 445 lobbyists and lobbying firms working on behalf of Amazon, Apple, Google, Meta, and Microsoft, along with industry groups like TechNet and the State Privacy and Security Coalition.

    Continue reading
  • SEC probes Musk for not properly disclosing Twitter stake
    Meanwhile, social network's board rejects resignation of one its directors

    America's financial watchdog is investigating whether Elon Musk adequately disclosed his purchase of Twitter shares last month, just as his bid to take over the social media company hangs in the balance. 

    A letter [PDF] from the SEC addressed to the tech billionaire said he "[did] not appear" to have filed the proper form detailing his 9.2 percent stake in Twitter "required 10 days from the date of acquisition," and asked him to provide more information. Musk's shares made him one of Twitter's largest shareholders. The letter is dated April 4, and was shared this week by the regulator.

    Musk quickly moved to try and buy the whole company outright in a deal initially worth over $44 billion. Musk sold a chunk of his shares in Tesla worth $8.4 billion and bagged another $7.14 billion from investors to help finance the $21 billion he promised to put forward for the deal. The remaining $25.5 billion bill was secured via debt financing by Morgan Stanley, Bank of America, Barclays, and others. But the takeover is not going smoothly.

    Continue reading

Biting the hand that feeds IT © 1998–2022