Coinbase Under a Dark Cloud as Rumors of Bankruptcy Surface on Social Media

Rainy days for the top US crypto exchange as it gets dragged down into the FUD

The controversy surrounding Coinbase has worsened as a result of the extreme market conditions that have been present for the past couple of weeks. The largest crypto exchange in the United States was recently forced to laid off as much as 18% of its workforce, and not in the most pleasant way. Furthermore, the company inadvertently admitted that customer funds would probably be lost in the event of bankruptcy.

The post on the official Coinbase blog surfaced on June 14th, and featured an apology from CEO Brian Amstrong for the unexpected “downsize”, where he cited multiple reasons for the decision, including “growing too quickly”. An email delivering the bad news was sent to the personal email accounts of the affected personnel, and access to the Coinbase digital workspace was terminated in advance. I realize that removal of access will feel sudden and unexpected, and this is not the experience I wanted for you”, lamented the Coinbase CEO.


Indeed, Brian Armstrong, who bought a $133 million mansion in Bel-Air to celebrate the New Year, felt that “employee costs are too high to effectively manage”. As a result, 1,100 employees lost their jobs in the blink of an eye.

It Hits the Fan on Social Media

The fuss surrounding Coinbase on Twitter and TikTok suggests something shady. According to one ex-worker on TikTok, Coinbase is facing a great deal of debt, and is getting ready to file for ‘Chapter 11’. This effectively means that management would be able to continue to run the company, but any major business decisions would have to be first approved by a bankruptcy court. Moreover, filing for Chapter 11 would likely result in the halting of all customer withdrawals, similar to what happened with Celsius just a week ago.

What Happens to Investor Money in the Event of Bankruptcy?

As “Coinbase bankruptcy” and “Coinbase scammed”  trend on Twitter, many traders are starting to ask themselves how safe the money they invested on the top American crypto trading platform really is.

The earnings report that Coinbase declared on Tuesday highlights that the company holds $256 billion in fiat and crypto on behalf of its clients. The scariest part of the report is the disclaimer stating: “crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings”. In this scenario, Coinbase users would be rendered unable to access their funds, or even to request withdrawals.

To conclude, the situation is full of confusion, as claims surface that customer funds meet the criteria of being labelled “financial assets”, and should therefore be protected under UCC ‘Article 8′ in case of bankruptcy. Ironically, Coinbase’s terms of use state that all funds belong to the user, and are not transferred to Coinbase, “unless instructed by you”.


This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Tadas Klimasevskis

Tadas Klimaševskis is a Lithuanian journalist at DailyCoin, specializing in covering the lighter side of the crypto industry such as memecoins and pop culture in the metaverse. He has experience as a music artist, English language teacher, and freelance writer, and uses his creative writing skills to summarize valuable information in his work. He is also a strong believer in the potential of blockchain and spends his free time listening to music, traveling, and watching basketball games.