According to (The New York Times), a representative from the leading U.S. cryptocurrency exchange Coinbase revealed that the SEC is investigating whether Coinbase inflated its user metrics before its 2021 listing, misleading investors.
(The New York Times) reported, citing informed sources, that the SEC is reviewing Coinbase's past disclosures, including its registration statement during its direct listing. In the statement, Coinbase claimed that the exchange had over 100 million 'verified users.' However, about two years later, that number was quietly removed from public filings.
The aforementioned SEC investigation was initiated during the administration of former President Biden and has continued into the more cryptocurrency-friendly Trump administration. Coinbase went public through a direct listing on April 14, 2021, trading on the Nasdaq under the ticker symbol 'COIN.'
Coinbase's stock price fell 7.2% to close at $244.44 per share on the 15th.
Coinbase's Chief Legal Officer Paul Grewal stated that the investigation conducted by the SEC is 'an investigation left over from the previous administration, concerning a metric we stopped reporting two and a half years ago, and it has been fully disclosed to the public.'
Paul Grewal said, 'While we believe this investigation should not continue, we remain committed to cooperating with the SEC to resolve this matter.'
It is worth noting that the SEC has dropped another lawsuit, which accused Coinbase of operating as an 'unlicensed broker and exchange.' As this case was dismissed, the SEC also withdrew a series of enforcement actions and investigations initiated during the tenure of former chairman Gary Gensler.
In its 2023 securities filing, Coinbase stated that it would start disclosing 'monthly transaction user numbers' instead of 'verified user numbers,' on the grounds that verified user numbers 'do not reflect our overall performance' and 'no longer provide insight into our performance.'
Coinbase stated, 'We have explained that the verified user metric includes anyone who has verified their email or phone number with us, so it may overstate the number of unique customers.'
According to the exchange's S-1 registration statement on February 25, 2021, 'verified users' include all retail, institutional, and ecosystem partners who have registered a Coinbase account using a phone number or email, as well as non-custodial wallet users.
Coinbase CEO Brian Armstrong claimed as of 2022 that the exchange had as many as 103 million verified users, making it the largest cryptocurrency exchange platform in the United States.
Coinbase revealed on Thursday that the exchange's overseas customer service personnel were bribed by hackers, leading to the theft of customer personal data used for identity verification (KYC), estimating a loss of $180 million to $400 million.
"Did Coinbase exaggerate its user numbers before the 2021 IPO? The SEC had already launched an investigation" was first published in (Block Tech).