The Coinbase logo is displayed on a mobile phone screen with stock market percentages in the background.
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Coinbase on Thursday confirmed the U.S. Securities and Exchange Commission has been investigating whether the crypto exchange has misstated its user numbers.
The stock was last lower by 6%.
The inquiry focuses on the number of “verified users” reported by the company, which it has claimed is more than 100 million in various securities filings and marketing materials, according to The New York Times, which first reported the story that sent the stock lower. The investigation began during the Biden administration, which was famously hostile toward to the crypto industry, and has continued under the Trump administration’s more crypto-friendly SEC.
“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,” Coinbase’s chief legal officer Paul Grewal said in a statement shared with CNBC. “We explained that the verified users metric includes anyone who verified their email address or phone number with us, so it may overstate the number of unique customers.”
“While we strongly believe this investigation should not continue, we remain committed to working with the SEC to bring this matter to a close,” he added.
Grewal also noted that the company disclosed the “more relevant metric of monthly transacting users,” or the number of people who use the Coinbase platform in a given month, and continues to do so.
Coinbase shares were already under pressure after the company said earlier Thursday that hackers stole customer information and were demanding a $20 million ransom. The incident may cost Coinbase up to $400 million to fix, the company estimated.
Coinbase operates the largest crypto exchange in the U.S. In the past week, it announced an acquisition that is expected to help it expand its global reach and gained entry to the benchmark S&P 500 stock index, which will take effect next week. On the earnings call last week, CEO Brian Armstrong discussed his ambition to make Coinbase “the No. 1 financial services app in the world” in the next five to 10 years.