Overview

The SEC is conducting an inquiry into Coinbase, focusing on whether the company inflated its user statistics in historical security filings and advertisements. This investigation reportedly initiated during Gary Gensler’s leadership, continues to be pursued under the current regulatory environment, which is perceived as more crypto-friendly.

Details

• Current Situation: Coinbase has acknowledged a New York Times report that it is under investigation by the SEC for allegedly misrepresenting the number of its users in previous disclosures. Shares of the company have seen a 6.6% drop coinciding with the revelation, amidst prior disclosures of a security breach.
• Background: The investigation centers around a contentious claim by Coinbase that it had over 100 million ‘verified users,’ a metric it ceased using in its communications starting in 2021.

Statements

Paul Grewal, Coinbase’s Chief Legal Officer, commented on the SEC’s ongoing probe, stating:

“The SEC’s investigation is a remnant from a previous administration regarding a metric we stopped reporting two and a half years ago, which was fully disclosed to the public.” Grewal explained that the ‘verified users’ metric accounts for anyone who confirmed their email or phone number, which may lead to inflated perceptions of unique customer counts. He reiterated that the more pertinent figure is the number of ‘monthly transacting users,’ reflecting active engagement with the platform.

Despite Coinbase’s contention that the investigation should not proceed, the company remains open to collaborating with the SEC to resolve this matter."