American cryptocurrency exchange Coinbase has not been financially exposed to bankrupt Three Arrows Capital (3AC), Celsius, or Voyager Digital.
According to the exchange’s Medium blog post, Coinbase has not engaged in this type of lending practice. Instead, the firm is focused on building its financial business with Prudence while paying attention to the clients.
The prevalent extreme market condition of the crypto ecosystem has been fatal to several firms. Many have been forced into insolvency and finally filed for bankruptcy. Three of the affected firms which have recently been in the news are 3AC, Celsius, and Voyager Digital.
Crypto Creditors Suffers Loss After Crediting Bankrupt Firm
Crypto lender, Celsius suspended withdrawal and other transactions on its platform. Its swap and transfer products were also halted.
On the other hand, 3AC slipped into liquidation and was declared insolvent by the order of a court in the British Virgin Islands. Thereafter, a restructuring company known as Teneo was given the responsibility to handle the liquidation process.
As a protective measure from creditors, both Voyager Digital and Celsius filed for Chapter 11 Bankruptcy. Voyager was first to file for the reorganization petition at the United States Bankruptcy Court of the Southern District of New York. A few days later, Celsius declared $167 million in liquidated cash and also applied for bankruptcy.
Three Arrows instead filed for a Chapter 15 Bankruptcy as a non-US company trying to evade a lawsuit from creditors. While trying to liquidate these distressed crypto firms, many others received financial blows. A couple of them who served as creditors to these now bankrupt firms are now neck deep in debt.
Before the bankruptcy filings, Blockchain.com had been one of 3AC’s creditors. The crypto service firm bankrolled the hedge fund for four years, lending a total of $2 billion to 3AC all of which was repaid until this crypto winter. Genesis Trading platform is also one of 3AC’s biggest creditors now owed $2.36 billion.
Coinbase was not one of those lenders. The firm believes that such solvency and bankruptcy concerns were a result of insufficient risk control.
“Many of these firms were overleveraged with short term liabilities mismatched against longer duration illiquid assets”, the blog post said.
To reassure its investors and users of its strong solvency, Coinbase had to make this public announcement.