Coinbase Says If It Goes Bankrupt, It Might Seize Users' Crypto

Understandably, everyone hates it.

Failsafe

The crypto wallet company Coinbase appears to have quietly snuck a mutually-assured destruction clause into its latest earnings report.

As Fortune observed, the fine print in Coinbase's quarterly earnings report — which details both a $430 million loss and a 19 percent drop in users per month — explains that if the company goes bankrupt, it could possibly take all the crypto in its users' wallets.

In a subsection noting that the company currently holds $256 billion total in both cryptocurrencies and fiat, Coinbase added that in the event of bankruptcy, its users would become "general unsecured creditors" and "the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings."

Anxiety

After people caught wind of the bizarre fine print admission and were understandably pissed, Coinbase CEO Brian Armstrong took to Twitter to try to assuage their concerns.

"Your funds are safe at Coinbase," Armstrong tweeted, "just as they’ve always been."

He added that the company "has no risk of bankruptcy," and only included the risk clause due to a new Securities and Exchange Commission requirement.

"This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically," Armstrong continued, adding that it is nonetheless "possible, however unlikely, that a court would decide to consider customer assets as part of the company in bankruptcy proceedings even if it harmed consumers."

So much for quelling user anxiety.

READ MORE: Coinbase earnings were bad. Worse still, the crypto exchange is now warning that bankruptcy could wipe out user funds [Fortune]

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