Coinbase

[Delano]

Does it have a future?

[Mel Hopkins]

Yes, but if we only use it for trading cryptocurrency.  Once you make a purchase...send it to your storage wallet. 

[Delano]

Do you see the article saying that investors were unsecured creditors?

[Mel Hopkins]

I haven’t.  And I am naive when it comes to certain aspects of finance.  I only think about unsecured creditors when it comes to lining up for money after filing bankruptcy.  

 

But I think people are getting confused between traditional finance and decentralized finance. There  are few protections in DeFi.  traders are own their own and risk and reward is very high.  

 

When you mentioned coinbase - I was looking at from a trading/depositor perspective. Once cryptotraders get coins they deposit in their noncustodial wallets like mycelium - cryptotraders know not leave large sums in coinbase.

[Delano]

The article article was about Coinbase going bankrupt.

The article article was about Coinbase going bankrupt.

[Troy]

Coinbase Lets Users Know What a Bankruptcy Could Mean for Their Crypto

https://www.bloomberg.com/news/articles/2022-05-11/coinbase-gives-256-billion-reminder-about-agonies-of-bankruptcy

 

[Delano]

If they default it could start a panic.

[Mel Hopkins]

1 hour ago, Delano said:

 

If they default it could start a panic.

 

 

Panic would only happen among people who don’t understand decentralized finance.  

 

Even when hackers hit Coinbase  - folks didn’t panic. The took the L but coinbase also has criminal insurance.  

 

Most cryptotraders don’t even deal with exchange platforms.  They trade peer-to-peer.  

 

Coinbase is for people looking to play it safe … which is why coinbase content does it best to explain’s cryptocurrency’s movement and volatility. 

 

[Stefan]

Because I was such a fast writer and editor, I used to walk into my top editors' offices and ask for more work. So, they assigned me to edit Corporate Bankruptcy stories.

And man, did I learn a lot. 

In a Chapter 11 Bankruptcy, the debtor, or the bankrupt company, is protected from its creditors. They can't remove anything or sue the company for its assets. If the company keeps its assets, it's often referred to as a Debtor in Possession. But this is determined by a Chapter 11 judge.

Normally, banks and other financial lenders are considered secured creditors. This means if the company's reorganization plan is later approved by a judge, these folks get paid first. They may not get all of their money back, but they will get something.

Now, stockholders or other investors are unsecured creditors. The rank on the same bottom step as employees who are owed wages. These may also include companies that provided services, such as computer suppliers, utilities, transport companies and apparel. 

Usually what happens when there is not enough money left over after paying the lawyers and secured creditors is that unsecured creditors get pennies on the dollar even if they are collectively owed millions. If things go really bad for them, a former colleague f mine loved to write: They "are wiped out." They get nothing. 

This is why investors in Coinbase are considered unsecured creditors. 

Now you know why Donald Trump filed for Chapter 11 four times. He got away without paying his workers, his contractors, his rent, his furniture and fixture providers and these include all of his liquor suppliers. Unless they got pennies on the dollar. They were all unsecured creditors. 

By the way, a Chapter 7 is a liquidation. Which means the company that is bankrupt will either sell or auction off all of its assets, including lighting fixtures, to raise money. Companies that are going out of business will usually do this.

Chapter 13 is for individuals who file bankruptcy to reorganize their debts. 

In case anyone is wondering is there are successful corporate reorganizations, there are scores of them every year. One of the most successful that I know is a company called Marvel Comics.

Its comic book sales were doing so badly and the company kept borrowing to keep itself afloat that the financial situation became untenable. So, Marvel filed for Chapter 11. 

And its reorganization plan, which had to convince Marvel's secured creditors so it could emerge from Chapter 11 and be a profitable company, Marvel said it would use its many comic book characters, Spiderman, Iron Man, Thor, The Hulk, Dr. Strange, The Avengers, Black Panther and others and feature them in full length movies. 

The secured creditors bought into the plan. And we know what happened.

Marvel made millions.

So, there is light at the end of Chapter 11. You just got to have the right Reorganization Plan, the right lawyers and pick the right Bankruptcy Court, which are the same as Federal District Courts.