Coinbase (COIN) Under SEC Investigation for Potential Misrepresentation of User Count

The SEC is examining cryptocurrency platform Coinbase over suspicions of inaccuracies regarding its user count in previous securities reports and marketing communications.

This investigation originally initiated under the previous administration when the SEC was led by Gary Gensler. It has continued under the current leadership, which is considered more favorable to the cryptocurrency sector.

The focal point of scrutiny is Coinbase’s assertion of having more than 100 million “verified users.” The company ceased utilizing this figure in its disclosures and promotional content in 2021, the same year it was listed on the Nasdaq.

Paul Grewal, Coinbase’s chief legal officer, stated via email that this SEC inquiry represents a continuation from the former administration concerning a metric that was discontinued two and a half years prior, which had been transparently communicated to the public.

Grewal clarified that the verified users count encompassed anyone who confirmed their email or phone number with Coinbase, potentially inflating the actual number of distinct customers. He highlighted that they also provide and still emphasize a more applicable statistic: “monthly transacting users,” which reflects the users engaging with the platform in a month.

Grewal expressed that they firmly believe the inquiry should not extend further, but remain dedicated to collaborating with the SEC to resolve the issue.

The SEC had not provided a response to CoinDesk’s request for input by the time of publication.

With the announcement of a data breach affecting them, COIN stocks dropped even further amidst the SEC news, reflecting a decrease of 6.6% during the trading session.