On Thursday, Coinbase confirmed an investigation by the U.S. Securities and Exchange Commission (SEC) regarding the potential misrepresentation of its user numbers. Following this announcement, Coinbase's stock fell by 6%. The SEC's inquiry centers on the company's claim of having over 100 million "verified users," a figure cited in various filings and promotional materials.
This investigation is reportedly a continuation of efforts that began during the previous administration, which had a more critical stance toward the cryptocurrency sector. Coinbase's chief legal officer, Paul Grewal, stated that the company ceased reporting the "verified users" metric two and a half years ago and had disclosed that this number included individuals who simply verified their email or phone numbers, potentially inflating the count of unique customers.
Grewal expressed the company's belief that the investigation should not proceed, emphasizing Coinbase's willingness to cooperate with the SEC to resolve the issue. He noted that the company has shifted focus to the "monthly transacting users" metric, which more accurately reflects active users on the platform.
Coinbase's stock was already under pressure due to a recent incident where hackers reportedly stole customer data and demanded a $20 million ransom, which the company estimates could cost up to $400 million to address.
In addition to the ongoing investigation, Coinbase has been active in expanding its business, recently announcing an acquisition aimed at enhancing its global presence. The company is also set to be included in the S&P 500 index next week, marking a significant milestone for its position in the financial services landscape. CEO Brian Armstrong has articulated ambitious plans to position Coinbase as a leading financial services app within the next decade.