Reason to trust
How Our News is Made
Strict editorial policy that focuses on accuracy, relevance, and impartiality
Ad discliamer
Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.
Coinbase, the largest cryptocurrency exchange in the US, has confirmed that the Securities and Exchange Commission (SEC) is investigating whether the company misrepresented its user numbers.
The inquiry, which has caused the stock to drop by 6%, centers on the number of “verified users” Coinbase has reported, which the company claims exceeds 100 million in various filings and marketing materials.
Coinbase Defends Verified Users Metric
This investigation, first reported by The New York Times, has its roots in the previous Biden administration’s scrutiny of the crypto industry. However, it has continued under the current administration, which has taken a more favorable stance toward cryptocurrencies.
Paul Grewal, Coinbase’s chief legal officer, addressed the investigation in a statement, asserting that it pertains to a metric the company stopped reporting two and a half years ago.
The exchange’s CLO clarified that the “verified users” metric includes anyone who has verified their email address or phone number, potentially inflating the number of unique customers.
Grewal emphasized that Coinbase has shifted its focus to a more relevant metric: the number of monthly transacting users, which accurately reflects active engagement on the platform.
“While we strongly believe this investigation should not continue, we remain committed to working with the SEC to bring this matter to a close,” he stated.
$20 Million Ransom Incident
The scrutiny comes amid a challenging week for Coinbase, as the company reported a security breach that led to hackers stealing customer information and demanding a ransom of $20 million.
The breach, which the company estimates could cost up to $400 million to rectify, involved bribing a small number of customer support contractors. These insiders accessed internal tools to extract names, email addresses, and limited transaction records.
Fortunately, Coinbase confirmed that no passwords or private keys were compromised, and the incidents primarily affected less than 1% of the company’s monthly active traders.
In response to the ransom demand, Coinbase has refused to pay the hackers and instead announced a $20 million bounty for information leading to their capture. Looking ahead, Coinbase plans to enhance its data controls and will relocate some of its support operations to improve security.
The company will also implement stricter vetting processes for staff and increase its fraud-monitoring capabilities. Users can expect more alerts for unusual activities on their accounts as Coinbase takes proactive measures to safeguard their information.
Despite these challenges, Coinbase remains ambitious. The company recently announced an acquisition aimed at expanding its global reach and is set to enter the S&P 500 stock index next week.
In a recent earnings call, CEO Brian Armstrong expressed his vision for Coinbase to become “the No. 1 financial services app in the world” over the next five to ten years.
Featured image from DALL-E, chart from TradingView.com
