Topic: Recent events should make you withdraw all your coins to your own wallet: Part 2 (Read 1474 times)

There is plenty of information or say awareness thread regarding not to hold you coins over these CEX but still people prefer to go this way and then regret losing funds whenever the exchange goes bankrupt but in actual the people will be the real victim losing funds and they will be covering their personal loss with your funds.

The recent meltdown of FTX has summed up why these big exchange is also prone to high risk and your entire networth could be gone in seconds with these situations coming up.They were holding the asset reserve in their native token FTT and after the CZ decided to sell his stake of 10% in FTX and he got paid off in FTT which he stated selling while the balance sheet got leaked which states they were maintaining reserve with 1:1 ratio in FTT only.People got panicked and started selling and FTT token wasn't able to match the reserve funds while withdrawal got stuck and rest is well known how the market reacted towards it viping billion dollars out of market.

So now there are these reports stating that SBF planning to flee to Dubai and what else do you expect them to do afterwards? They are under supervision but will people get their funds back? No so your thread clearly summaries why should we always avoid keeping funds over these exchanges as Not your keys,not your coins

Keep funds in your custody if you can always and don't trust these CEX...

Another bump. Read this thread from bbc.reporter: https://bitcointalksearch.org/topic/--5419386

FTX is looking like it is in a precarious situation. Reports arose which showed that FTX was artificially inflating its balance sheet with its own token which was being printed out of thin air. Binance heard about this so decided to liquidate all their holdings to protect themselves. This caused the token price to plummet, as well as the amount of token held in reserve on FTX to plummet. This his resulted in lots of users trying to withdraw their coins from FTX, and now FTX have been delaying and staggering withdrawals because they can't keep up. Looks like they are on the verge of a bank run and/or the verge of their token dumping to worthlessness.

If for some crazy reason you are still trusting these centralized platforms to hold your coins after the number which have collapsed in recent months, then time to get your coins off of FTX and in to your own wallets. Now. Best case scenario and this is all unfounded, then you have lost nothing by withdrawing your coins.

Bump. Plenty more centralized exchanges and platforms have bit the dust.

8 August - Hodlnaut suspend all withdrawals, trades, and deposits - https://www.hodlnaut.com/press/hodlnaut-message-to-our-users
9 August - Nuri files for insolvency - https://nuri.com/blog/nuri-filed-for-insolvency/
10 August - Hotbit suspends all withdrawals and other activity - https://hotbit.zendesk.com/hc/en-us/articles/8074249353495-Announcement-on-the-Suspension-of-Hotbit-Website-Service

That last one is interesting - they state it is because a bunch of their senior managers have been subpoenaed and their funds frozen due to a criminal investigation.

Don't worry though. While centralized platforms continue to shut down all over the place and their users lose everything, the CEOs of these platforms continue to make some nice profits at your expense: https://www.coindesk.com/markets/2022/08/09/dormant-wallet-linked-to-alex-mashinsky-used-to-cash-in-on-cel-token-surge/

Some will, but the majority won't. This is proven by the very fact that platforms like Nexo and BlockFi continue to operate and attract new users while Celsius and Voyager are going through bankruptcy proceedings. There is no shortage of examples of people losing money from centralized exchanges in a variety of ways, and yet millions of users still store millions of bitcoin with such exchanges.

Would it? We've just seen many examples over the last month of platforms who were unable to satisfy all withdrawals, and yet managed to continue to operate to the point of declaring bankruptcy.

Again, doesn't seem to be any shortage of entities willing to hand out risky loans.

When enough exchanges go out belly up, and when enough lending platforms become insolvent, people will eventually wise up. Keeping customer money legally separate would prevent customers from panic withdrawing when other exchanges are insolvent, and processing withdrawals in mass is expensive and risky.

I think Coinbase trying to encumber coin to an extent that they no longer have unencumbered coin available to satisfy all customer withdrawals would be challenged in court. Also, if the financial statements reflect that the new loan is resulting in Coinbase being unable to satisfy all customer deposits, any new loan to Coinbase would be risky.

What reason do they have to change it? They know fine well that 99% of their users don't even know what that means, and of the few who do, the majority of them simply don't care because they think Coinbase are too big to fail. You've said yourself it won't be trivial to come up with a new framework to change this, and will be a lengthy and costly process. They have proven repeatedly that they don't give a damn about what happens to their users, so why would they waste their time, efforts, and money, when it will make absolutely zero difference to their profits?

Yet, it might still be beneficial to keep standard users as unsecured creditors, as they can use that as a safety net selling point to attract investment from corporations and institutions. "Hey, if it all goes to shit, we have $x billion of unsecured assets we will use to pay back this secured loan/investment you are going to offer us."

So that means the FAQ and the documents the WSJ claimed to see are not in conflict. I had originally read the FAQ differently, and I presume others similarly did.


What reason does Coinbase have to keep their customers' deposits as unsecured creditors?

They get out of it by using deliberately vague and misleading language. Emphasis mine:

I doubt it very much. They'll say they will on Twitter to placate their users, then once this episode of insolvencies and bankruptcies blows over it will all be forgotten about, and all their users will continue to be at risk as they always have been.

Cross post it to this thread: https://bitcointalksearch.org/topic/blacklist-of-unreliable-taint-proclaiming-bitcoin-services-exchanges-5401468. Get it added to the list of exchanges to avoid.

To me they let the coins come but I won't use it again ever after going to such nonsense questions that they asked,however from a lot of friends from Western Balkan countries I got a lot of other complaints as I keep contact with them and they had the same problem,they are under strict verification problem and after giving everything to such exchange it has been near one week without answer,every time they try to withdraw they got rejected,even when they withdraw crypto and not only FIAT money.

The exchange is Cex.io which recently looks like has started a massive attack against Bitcoin which they claim their mission is to provide a gateway to open financial markets.

That complicates things. The FAQ says to refer to the ToS.

Do I trust that Coinbase is trying to find a mechanism to change customers' status of "unsecured creditors"? Yes, I think they have good reason to want to change this status. I think it is not trivial to change this status, and Coinbase's lawyers will need to find a solution that is generally new.

With that being said, until the "unsecured creditors" status is actually changed, their customers should act as if they are unsecured creditors accordingly.

I would not describe it as a pyramid scheme, I would describe it as greedy, and companies doing what is essentially gambling with their customers' money.

Most won't, and they few that have will be replaced dozens of times over by more newbies willing to throw their money away during the next bull run with whatever new shiny product or platform is next.

We saw this repeatedly during the height of ICO craze in 2017/2018. Coins and tokens being released all over the place with no function whatsoever except to grow the value of the company and make the creators some profits at the expense of all their buyers. Then we saw it with IEOs, ITOs, and whatever other nonsense acronyms came next. Then NFTs. Then DeFi and tokens belonging to platforms like Celsius. We will absolutely see it again in the next few years, and lots more users will lose lots more money.

Because there is no shortage of people who are willing to throw their money away on scams with promises of getting rich quick. And so there is no shortage of scammers willing to take advantage of them.

The act of creating a token and basing your company around it is actually called "tokenomics" by the crypto industry.

Unfortunately this is also a growing trend amount crypto companies.

I'm really shocked by the number of companies in this industry making under-collateralized loans, loans with risky collateral, or simply not reacting quickly enough. I hope lenders and depositors have learned something from this catastrophe. One good rule of thumb is to avoid depositing money in any company that has its own token -- it is basically a pyramid scheme and it is destined to fail.

Name and shame please. Any exchange which actively attacks bitcoin by enforcing made up taint nonsense should be widely exposed and condemned so other people know to avoid them. There should be no place in the crypto ecosystem for exchanges which apply arbitrary and provably false metrics to users' coins.

I would go further. If you have bitcoin stored on any centralized platform, then you don't own that bitcoin. Withdraw everything, everywhere.

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Here's another exchange which has paused withdrawals: https://www.msn.com/EN-US/news/markets/zipmex-joins-growing-list-of-crypto-exchanges-to-block-withdrawals/ar-AAZPGFn
Seems like they have partially reopened some withdrawals in some regions since that article was published, but are obviously still scrambling to try to cover the big deficit in their books.

It is funny how I receive a lot of complaints from a lot of my friends who mine crypto that they exchange coins to an exchange and the exchange there tells them they need info to proceed further.They told me that they gave them all the screenshots needed verifying their mining activities and to one person they even requested to sign a message to verify the wallet that he was making the deposits was his,he provided him that further evidence but the funds remain locked there without further explanation from the exchange.I will tell next week the name of this exchange after a hopeful clarification has occurred,I highly doubt they will release his funds but just in case.

Get every Bitcoin you have in "shitty" exchanges that ask a lot of questions since the new law from EU has been implemented or you risk those freeze without a convincing explanation

But if they are taking their trading fees in BTC, ETH, or some other coin, the price of that asset in USD absolutely matters to how much profit they make in terms of USD, which is all they really care about.

It also conflicts with their own ToS, which say that they are under no obligation to hold on to any collateral whatsoever.

And you trust them? As I pointed out in my previous post, Coinbase lie constantly. And as we agreed on just there, other platforms such as Celsius have told blatant lies. These platforms will say anything to try to placate their users or attract new ones. Until I see legal documents from Coinbase (i.e. never) saying that users are not unsecured creditors, then anything else they say can and should be ignored.

That statement conflicts with the 'investor documents' that the WSJ has claimed to see.

The FAQ does say to refer to the TOS.

Unfortunately, customers are going to have no recourse if they relied on the discrepancy, even if there is liability on the part of Celsius, as based on their bankruptcy filings, Celsius has negative equity.

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I don't think coinbase is at serious risk of bankruptcy. Obviously, there are real risks associated with keeping your coin on an exchange, and one should consider those risks if they are going to do so.

Coinbase has said in the past that they are working on legal mechanisms to change customers' status as 'unsecured creditors'.

You can't rule anything in the crypto world out but right now even with all those dominos falling right and left I think Coinbase is still safer than a lot, and if it finally fails it will be probably among the last.

Google translation of DdmrDdmr post

To be fair nobody trusted MtGox that much at that time, they were just big but a lot had problems with it, it was previously hacked, and many were already sounding alarms about the amateurish way it was run, their whole brief existence if just a series of failure and lawsuits and hacks.
MtGox was so big because there was no real alternative at that point, not because of their trustiness.

It's probably worth pointing out that every one of the centralized exchanges and lending platforms which has gone bankrupt over the last few weeks has said some variation of "your funds are safe" in the days leading up to halting all withdrawals. Of course they are going to say that - they want to minimize any panic and any bank runs which would accelerate their demise. It's probably also worth pointing out that Coinbase lie, like, a lot. "We don't insider trade." "We don't sell your data." Lol.

Rather than basing your investment decision from a tweet, maybe look at the actual legal filings which show Coinbase making huge losses and the fact that all users are considered "unsecured creditors" (which means in the event of bankruptcy, you are absolutely last on the list to get back anything at all, as all the people who have lost all their money on Celsius and Voyager are currently finding out).

Mt Gox was too big to fail. Lehman Brothers was too big to fail. Coinbase is just another exchange.

For what it's worth, I think Coinbase probably aren't going bankrupt any time soon, but the fact remains that you should absolutely not be storing your money with them or with any other centralized exchange.

Recently DdmrDdmr has started a thread on our local section on the potential bankruptcy of Coinbase. Apart from the reasons that have been mentioned about this type of centralised entities that can freeze your coins, if Coinbase were to go bankrupt, which I still find hard to believe, we would have another reason to have had our coins in our wallets instead of there, because I doubt that in that hypothetical case, depositors would get back after the liquidation, not even close to 100% of what they deposited.

DdmrDdmr uses a Spanish article as a source, but I have searched in English and there are also some:

Will Coinbase go bankrupt?

Amid fears of Coinbase going bankrupt, CLO says ‘Your funds are safe’; company to lay off 18% workforce

LMAO. When I see these kinds of statements I start to worry.

Coinbase Under a Dark Cloud as Rumors of Bankruptcy Surface on Social Media

Where there's smoke there's fire, you know, and although sometimes what looks like smoke may have been steam or something else, I don't think we should rule out the possibility of bankruptcy even though Coinbase seems too big to fail as DdmrDdmr says.