The U.S. Securities and Exchange Commission (SEC) is currently investigating Coinbase to determine if the cryptocurrency exchange misled investors by overstating its user metrics during its public debut in 2021.
This investigation was first reported by The New York Times, which cited anonymous sources indicating that the SEC is examining Coinbase’s past disclosures, particularly its registration statement for its direct listing. At that time, Coinbase claimed to have over 100 million “verified users,” a figure that was later removed from public reports about two years later.
The inquiry reportedly commenced during President Joe Biden’s administration and has persisted into the more industry-friendly era of President Donald Trump. Coinbase went public on April 14, 2021, trading under the ticker symbol COIN on the Nasdaq. As of the latest data, the stock has seen a decline of 6.6%.
Paul Grewal, Coinbase’s chief legal officer, stated that the investigation is a continuation from the previous administration regarding a metric that the company ceased reporting two and a half years ago. He emphasized that the company is committed to cooperating with the SEC to resolve the matter, expressing confidence that the investigation should not proceed.
Interestingly, the SEC had previously dropped a separate lawsuit against Coinbase, which accused the exchange of operating as an unlicensed broker and clearing house. This case was dismissed amid a broader trend of retracted enforcement actions during Gary Gensler’s tenure as SEC chair.
In a recent securities filing, Coinbase announced a shift in how it reports user metrics, opting to disclose “monthly transacting users” instead of “verified users.” The company argued that the latter metric was no longer a reliable indicator of its overall performance.
Grewal explained that the “verified users” figure included anyone who had verified their email or phone number, which could inflate the actual number of unique customers.
As of 2022, Coinbase CEO Brian Armstrong had claimed that the exchange had approximately 103 million verified users, positioning it as the largest cryptocurrency trading platform in the U.S.
