Exchanges publishing a document saying that in case of bankruptcy your assets could be used to cover debt to creditors is one of the biggest reasons why you shouldn't hold any crypto on exchange.

I was just browsing on the web, reading some articles and stuff when I stumbled upon the document of Coinbase exchange that was published last year saying and this is one of the best reasons that I stumbled upon why holding crypto on an exchange is a terrible idea.

Well, so far Coinbase has been secure platform for trading crypto, and they are suing SEC so probably most of us are hyped about it.

Well I stumbled upon their form that was published- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q

It says like this:

"Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors,"

So basically, if they go bankrupt they can take your money.

This may be changed and old news, however I didn't found a document saying that.

So what happens if Coinbase goes bankrupt? Well, they will try to pay off their debt owed to creditors and if that value exceeds the value of company's own assets, they will take money from the customer pool (or you) to cover that expense. Amazing isn't it?

And what was said about it?

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https://preview.redd.it/1jie7pw5howa1.png?648&format=png&auto=webp&s=02ef855743f744364cf6cb4a5f97412220565aff

It was said that literally they can try this on court if it happens, your funds are safe, but in case this happens, court will decide whether or not we will take your money.

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By the way, full support for suing SEC, go get them Coinbase.