Coinbase shares took a sharp hit in after-hours trading, sliding 7% to $244, following a one-two punch of troubling revelations: a cyberattack targeting customer data and a revived SEC investigation into its 2021 user metrics.
The New York Times first broke the news, and Coinbase confirmed that the U.S. Securities and Exchange Commission has been actively investigating whether Coinbase misrepresented its user count in documents tied to its 2021 IPO. The probe reportedly originated during the Biden administration and has persisted into the Trump administration.
Coinbase’s Chief Legal Officer, Paul Grewal, responded,
“This is a hold-over investigation from the prior administration about a metric we stopped reporting two and a half years ago, which was fully disclosed to the public.”
Grewal emphasized that Coinbase now reports more meaningful figures like “monthly transacting users,” and reiterated the company’s willingness to cooperate with the SEC while also calling for the investigation to end.
At the heart of the SEC’s concern is Coinbase’s promotional use of “100+ million verified users,” a figure prominently displayed during its IPO marketing push. Though the exchange stopped using that metric in 2022, the regulator appears unsatisfied with how the company framed its user base. Despite the SEC and Vermont previously dropping a separate 2023 enforcement lawsuit against Coinbase, this specific line of inquiry has continued.
Coinbase has enlisted legal heavyweight Davis Polk & Wardwell to navigate the investigation.
Adding to the turmoil, Coinbase disclosed a $20 million extortion attempt linked to a recent data breach. The exchange revealed that cybercriminals colluded with overseas customer support contractors to gain unauthorized access to user account data. According to the company, only a “small subset” of customers was affected.
While Coinbase refused to pay the ransom, it pledged to compensate customers impacted by phishing attacks stemming from the breach. Remediation and reimbursement costs are estimated between $180 million and $400 million. The double blow of regulatory scrutiny and cybersecurity concerns has rattled investors, casting a shadow over Coinbase’s near-term prospects.
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