Coinbase “had no financing exposure” to collapsed crypto schemes Celsius Network, Three Arrows Capital (3AC), and Voyager Digital, the company said in a blog post. Each firm filed for bankruptcy protection after the Terra-Luna implosion set off a cascade of liquidations in highly leveraged positions. Coinbase shares climbed more than 14% following the statement. The company’s stock has plunged roughly 70% since the start of 2022.
“Many of these firms were overleveraged with short-term liabilities mismatched against longer duration illiquid assets,” the company said. “We have not engaged in these types of risky lending practices and instead have focused on building our financing business with prudence and deliberate focus on the client,” it explained.
Coinbase said it did make “non-material investments” in Terraform Labs, the Singapore-based company behind failed stablecoin project Terra, through its venture capital business. The crypto market has been in a state of disarray ever since the demise of Terra, a so-called “algorithmic” stablecoin that tried to maintain a $1 value using code. This led to liquidity issues at Celsius Network, 3AC, and Voyager Digital. Eventually, they had to file for bankruptcy protection.
