In an eerie case of foreshadowing for the crypto market, crypto exchange Coinbase Global disclosed in its first quarter 10-Q filing with the U.S. Securities and Exchange Commission that crypto held for its customers’ accounts potentially could become property of a bankruptcy estate—and its customers treated as unsecured creditors—should the exchange file for bankruptcy. SEC Chair Gary Gensler echoed this concern a few days later: “If the platform goes down, guess what? You just have a counterparty relationship with the platform. Get in line in bankruptcy court.”

Less than three months later, the crypto world was rocked by the Chapter 11 bankruptcy filings of two major platforms—Voyager Digital and Celsius Network. According to the Wall Street Journal, seven significant crypto-related companies, including Coinbase, have undertaken significant layoffs, suggesting that more crypto bankruptcies may be on the horizon. Vicky Ge Huang, Seven Crypto Companies That Laid Off Employees This Summer, Wall Street Journal (July 21, 2022).

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