Coinbase blames ‘fallout from unscrupulous actors’ for cutting 20 per cent of workforce

The “fallout from unscrupulous actors” in the cryptocurrency world is continuing with the crisis-plagued sector seeing a new round of lay-offs.

Coinbase is further slashing its workforce by another 20 per cent. Picture: Ozan Kose/AFP

One of the largest cryptocurrency exchanges in the world, Coinbase, has blamed the worsening crisis in the sector and the “fallout from unscrupulous actors in the industry” for slashing 20 per cent of its workforce.

The move, which means around 950 employees have been fired, was announced by Coinbase co-founder and chief executive officer Brian Armstrong in a blog post where he warned there could be “further contagion” as cryptocurrency has slumped in value.

It’s the latest round of cuts from Coinbase, which let go of 18 per cent of its workforce – about 1200 employees – back in June, while it also fired 60 more employees in November.

The crypto exchange has also said it would shut down several projects.

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Monitors display Coinbase signage during the company's initial public offering (IPO) at the Nasdaq MarketSite in New York in 2021. Picture: Michael Nagle/Bloomberg

Mr Armstrong said there was no way to cut costs without reducing its workforce, adding the latest downturn had caused “plenty of fear and anxiety”.

“While some of the factors that have brought us to this point are beyond our control, accountability rests with me as the CEO. We also reduced headcount last year as the market started to correct, and in hindsight, we could have cut further at that time,” he wrote.

“This is the first time we’ve seen a crypto cycle coincide with a broader economic downturn.”

He also revealed that Coinbase employees, who were still yet to learn they had lost their jobs, had already had their access to the system removed.

“I realise this last step feels sudden and harsh, but I believe it’s the only prudent choice given our responsibility to protect customer information,” Mr Armstrong added.

Brian Armstrong, CEO and Co-Founder, Coinbase. Picture: Patrick T. Fallon/AFP

Impacted employees in the US would receive a minimum of 14 weeks base pay plus two additional weeks per year worked, health insurance and other benefits, while those working in other countries would receive similar support in line with employment laws.

The staff cuts and cancellation of projects will add up to $US149 million to $US163 million ($A216 million to $A236 million) in restructuring changes, according to a statement, with the overhaul expected to be complete by the end of the second quarter.

As a result, it is expected to book a loss of $US500 million ($A725 million) for 2022, with Coinbase shares tumbling by 86 per cent last year amid the crisis.

The Coinbase logo on a laptop computer. Picture: Tiffany Hagler-Geard/Bloomberg

The cryptocurrency world was rocked after one of Coinbase’s biggest competitors, exchange FTX, which was once valued at $US32 billion ($A46 billion), went under – creating a domino effect with other operators also collapsing and digital coins plummeting in value.

Disgraced founder Sam Bankman-Fried was arrested in the Bahamas following an investigation into the collapse of his empire and charged in the US with “orchestrating a scheme to defraud equity investors in FTX Trading LTD”.

Meanwhile, US bank Silvergate was forced to sell off assets and cut staff after it saw $US8 billion ($A11.6 billion) worth of cryptocurrency withdrawn by customers, while crypto brokerage Genesis laid off 30 per cent of staff.

Brian Armstrong, co-founder and chief executive officer of Coinbase. Picture: Michael Short/Bloomberg

However, Mr Armstrong was adamant that “crypto wasn’t going anywhere” and Coinbase could thrive during down markets by being rigorous with cost management.

He also acknowledged that tech companies had focused too much on one thing.

“Over the past ten years, we, along with most tech companies, became too focused on growing headcount as a metric for success. Especially in this economic environment, it’s important to shift our focus to operational efficiency,” he said.

“Dark times also weed out bad companies, as we’re seeing right now. But those of us who believe in crypto will keep building great products and increasing economic freedom in the world.”