Indian financial services firm Zerodha's co-founder and CEO Nithin Kamath sounded the alarm for crypto investors as the U.S. cryptocurrency exchange Coinbase (NASDAQ:COIN) Global Inc (NASDAQ: COIN) shot a bankruptcy-related warning.
Taking to Twitter (NYSE:TWTR), Kamath said Indian crypto investors on exchanges also need to be aware of this risk.
"Unlike the stock market where stocks are held in a demat with a depository & have no broker risk, crypto with exchanges carry a risk," he said.
Coinbase latest filing: Customer assets could be at risk in case of bankruptcy. Indian crypto investors on exchanges also need to be aware of this. Unlike the stock market where stocks are held in a demat with a depository & have no broker risk, crypto with exchanges carry a riskKamath is the CEO and co-founder of Zerodha, which is often touted as India's answer to Robinhood Inc (NASDAQ: NASDAQ:HOOD).— Nithin Kamath (@Nithin0dha) May 11, 2022
This came after Coinbase's latest quarterly filing stated that "in the event of bankruptcy, crypto assets held by the exchange could be considered property of the bankruptcy proceedings, and customers could be treated as general unsecured creditors. An unsecured creditor would be one of the last to be paid in any bankruptcy and last in line for claims."
However, Coinbase CEO Brian Armstrong stated that the disclosure in its latest quarterly filing did not indicate the cryptocurrency exchange desk faced a bankruptcy risk, and it had been made to meet SEC requirements.
Meanwhile, Coinbase — which enables trading of cryptos like Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH) and Dogecoin (CRYPTO: DOGE) — has seen its shares tumble 78% since the public offering in April 2021. This also eroded Coinbase chief's net worth – which came down drastically from $13.7 billion in November last year to just $2.2 billion now, according to the Bloomberg Billionaires Index.
Price Action: According to data from Benzinga Pro, Coinbase shares traded 13.5% lower at $46.48 on Thursday.
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