Coinbase confirms ‘no funding exposure’ to bankrupt crypto firms Celsius, Voyager, Three Arrows Capital


Crypto exchange Coinbase confirmed that the company “has no financial exposure” to bankrupt companies, including Celsius Network, Voyager Digital and Three Arrows Capital (3AC). “The issues here were predictable and actually credit-specific, not crypto-specific,” Coinbase pointed out.

Coinbase: “We did not engage in these types of risky lending practices”

Nasdaq-listed cryptocurrency exchange Coinbase clarified its approach to cryptocurrency funding in a blog post on Wednesday. The post is written by Brett Tejpaul, Head of Coinbase Institutional, Matt Boyd, Head of Prime Finance, and Caroline Tarnok, Head of Credit and Market Risk.

“The solvency issues surrounding entities like Celsius, Three Arrows Capital (3AC), Voyager and other similar counterparties were a reflection of insufficient risk controls, and reports of additional distressed companies are quickly becoming stories of bankruptcy, restructuring and failure,” the Coinbase executive detailed, adding:

Notably, the issues here were predictable and in fact credit-specific, not crypto-specific.

“Many of these companies were over-leveraged with short-term liabilities incompatible with longer-duration illiquid assets,” they noted.

“We believe these market participants have been caught up in the frenzy of a crypto bull market and have forgotten the basics of risk management. Unhedged bets, huge investments in the Terra ecosystem, and massive leverage provided and deployed by 3AC meant that the risk was too high and too concentrated,” the executives explained, noting:

Coinbase had no financial exposure to the above groups. We do not engage in these types of risky lending practices.

In September last year, Coinbase scrapped the launch of its Lend program after the U.S. Securities and Exchange Commission (SEC) threatened to sue the company if it went ahead with the launch.

Coinbase executives further noted that their company is “focused on building our funding business with caution and a deliberate customer focus.”

Crypto lenders Celsius Network and Voyager Digital filed for Chapter 11 bankruptcy earlier this month after crypto hedge fund Three Arrows Capital filed for Chapter 15 bankruptcy.

Coinbase also disclosed in the blog post:

Although Coinbase has no counterparty exposure to the companies listed above, Coinbase’s venture capital program has made non-material investments in Terraform Labs.

Singapore-based Terraform Labs is the company behind the collapse of the cryptocurrency terra (LUNA) and stablecoin terrausd (UST). The company is currently under investigation by South Korean authorities and the United States Securities and Exchange Commission (SEC).

What do you think of Coinbase’s explanation? Let us know in the comments section below.

Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.

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