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Coinbase Under SEC Investigation for Misstated User Numbers, Shares Drop
Coinbase confirmed on Thursday that it is under investigation by the U.S. Securities and Exchange Commission (SEC) over concerns that the company may have misstated the number of "verified users" in its filings and marketing materials. The announcement comes amidst a 6% drop in Coinbase’s stock price, following the news first reported by The New York Times.
The investigation, which started during the Biden administration and has continued under President Trump’s SEC, centers around Coinbase’s reported figure of more than 100 million verified users. According to the company, the “verified user” metric refers to anyone who has verified their email address or phone number with Coinbase, which the company acknowledged may have led to an overstatement of its unique customer base.
SEC Scrutiny Over User Numbers
Paul Grewal, Coinbase's Chief Legal Officer, addressed the matter in a statement shared with CNBC, emphasizing that the investigation pertains to a metric that Coinbase stopped reporting more than two years ago.
He further clarified that the company had shifted its focus to reporting a more relevant metric: “monthly transacting users,” which refers to the number of active users on the Coinbase platform each month. This metric continues to be disclosed by the company.
Despite the ongoing investigation, Coinbase remains committed to resolving the matter with the SEC.
A Rocky Week for Coinbase
Coinbase’s stock was already facing pressure after another significant issue surfaced earlier on Thursday. The company revealed that hackers had stolen customer information and were demanding a $20 million ransom. This breach may cost Coinbase up to $400 million in damages and remediation efforts, further compounding the company's challenges.
While the SEC investigation adds to the company's troubles, Coinbase’s recent achievements, such as its acquisition to expand its global reach and its entry into the S&P 500 index, reflect continued growth. The S&P 500 inclusion will take effect next week, signaling the company’s ongoing influence in the market despite recent setbacks.
Conclusion: A Cloud Over Coinbase's Future
The SEC’s investigation into Coinbase’s reported user metrics raises significant questions about the transparency of user data in the cryptocurrency sector. While Coinbase has acknowledged the issue and is working with the SEC to resolve it, the investigation highlights the regulatory scrutiny that continues to grow around the crypto industry, especially as cryptocurrencies move toward more mainstream adoption.
The company’s efforts to shift focus to more accurate metrics, combined with its continued expansion, will likely shape Coinbase’s path forward as it navigates these regulatory hurdles. How this investigation plays out will be a key indicator of how the SEC continues to interact with the growing cryptocurrency market under the Trump administration’s more crypto-friendly SEC leadership.
