Coinbase is back in the SEC’s spotlight! This time for possibly puffing up their user numbers during their flashy 2021 debut. The New York Times reports the SEC is poking around to see if the crypto exchange got a bit too creative with its user metrics back when it hit the Nasdaq.
Back in the day, Coinbase bragged about having over 100 million “verified users” when it went public via direct listing on April 14, 2021, trading under the ticker COIN. But surprise! That boast quietly disappeared from their reports about two years later. The SEC, apparently not a fan of surprises, decided to double-check those numbers.
This investigation actually kicked off under President Biden’s watch but is still trucking along despite the more crypto-friendly vibes of the Trump administration (talk about bipartisan scrutiny). Meanwhile, Coinbase’s stock is feeling the heat, dropping 7.2% as of the latest data.
From Verified Users to Monthly Transactors
Paul Grewal, Coinbase’s top legal eagle, claims the SEC’s sniffing is just “a hold-over investigation” from the previous administration about a stat they stopped flaunting two and a half years ago, and, of course, they say it was all “fully disclosed.” Grewal insists they’d rather just wrap this up and move on.
Oh, and remember that other SEC lawsuit accusing Coinbase of playing an unlicensed broker? Poof! That case got dropped amid a bunch of dropped investigations from Gary Gensler’s SEC days. Seems like Coinbase dodged that bullet.
Fast forward to 2023, and Coinbase switched gears, ditching the “verified users” stat for “monthly transacting users,” because apparently, the old metric was “not indicative of our overall performance” and just didn’t give the real picture anymore. Grewal explained that “verified users” included anyone who had just verified an email or phone number, which, surprise, might have inflated the crowd size.
Per their own Form S-1 from February 25, 2021, “verified users” counted everyone with a Coinbase account, even those who only registered with a phone or email, and non-custodial wallet users. So yeah, that 100 million might’ve been a bit generous.
Even as recently as 2022, CEO Brian Armstrong was proudly waving the 103 million verified users flag, calling Coinbase the biggest U.S. crypto trading platform. But now, with the SEC digging in and a recent hack exposing customer KYC info, the spotlight’s hotter than ever. Stay tuned, this crypto drama isn’t cooling off anytime soon.
HODL Team
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