Coinbase Says It Had No Exposure to Bankrupt Celsius Network, Voyager

Crypto platform Coinbase said it has no lending exposure to bankrupt firms Voyager Digital, Celsius Network, or Three Arrows Capital.

Coinbase said it is not affected by the contagion of recent bankrupt companies and  has no lending exposure to Voyager Digital, Celsius Network, or Three Arrows Capital, all of which collapsed and filed for bankruptcy protection amid the crypto crash.

The San Francisco-based crypto exchange said many companies and firms are struggling because of their over-leveraged and mismanaged balance sheets, claiming their problems are “credit specific” and not related to cryptocurrencies themselves, according to a blog post by the company.

“We believe these market participants were caught up in the frenzy of a crypto bull market and forgot the basics of risk management,” Coinbase said. “Unhedged bets, huge investments in the Terra ecosystem, and massive leverage provided to and deployed by [Three Arrows Capital] meant that risk was too high and too concentrated.”

It comes at a time when companies involved in crypto are continuing to look for ways to shave down their overhead and reduce costs. Recently, BlockFi, a Celsius competitor which operates a very similar crypto-lending business model, began offering employees buyouts after cutting their staff by 18% the month before. NFT marketplace giant OpenSea also laid off staff just last week.

Coinbase reiterated it has not engaged in any risky lending practices and has focussed on building its business in a fiscally responsible way. The company said one of its main goals is to be “the safest, easiest, and most trusted bridge” for investing in cryptocurrencies.

However, the company did note Coinbase’s venture program made a non-material asset in Terraform Labs, the company that oversaw the collapse of the Terra ecosystem, which erased billions of dollars worth of investor funds over the course of a few days.

Coinbase pointed out that it backs customer’s investments 1:1 and said any institutional lending activity they do at Coinbase is also backed by collateral. As a result, the company said it has experienced no losses from its financing book nor exposure to client or counterparty insolvencies. By contrast, Celsius‘ crypto lending business relied on the company using client funds, without customer discretion, and staking those assets in yield-earning protocols such as Lido.

“A leading prime broker, whether in crypto or other asset classes, should understand and effectively manage counterparty and liquidity risk for the safety of their clients, shareholders, and the market,” the company’s blog post read.

Amid the chill of cryptocurrency winter, Coinbase has taken steps to reduce its operating costs. Last month, the company laid off 18% of its workforce in preparation for a prolonged downturn in digital asset prices. Just this week, the company suspended its affiliate network marketing program, telling influencers that it was no longer supporting the program due to the bear market.

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