After reporting on a federal investigation, the stock slips by 6%. The regulatory scrutiny is because Coinbase deals with the aftermath of a cybersecurity violation that was disclosed earlier in the day. The hacker reportedly stole customer data and is demanding a $20 million ransom.
Coinbase confirmed Thursday that the Securities and Exchange Commission is investigating whether the company exaggerates its user numbers in previous disclosures.
The developments first reported by the New York Times contributed to a decline of approximately 6% in Coinbase stock during the session.
This inquiry focuses on reporting “verified users” at Coinbase. This is the metric the company cited in its filing and promotional materials as a total of over 100 million.
The investigation occurred during the Biden administration and continues under the current SEC, which has taken a relatively good stance towards the crypto industry, according to the report.
In a CNBC statement, Coinbase Chief Legal Officer Paul Grawar said:
He added that the verified user figures included anyone who completed the email or phone number verification.
Grewal also highlighted that Coinbase focuses on different disclosures. This is a number where monthly trading users and companies know more relevant metrics of platform activity.
“We strongly believe that this investigation should not continue, but we are committed to working with the SEC to end this issue,” he added.
Cyberattacks add market pressure
The regulatory scrutiny is because Coinbase deals with the aftermath of a cybersecurity violation that was disclosed earlier in the day.
The hacker reportedly stole customer data and is demanding a $20 million ransom.
Coinbase estimates that the incident could cost the company up to $400 million.
Timing combines a period of volatile for the company.
Coinbase recently announced its inclusion in the effective S&P 500 index next week, revealing its plans to acquire the Crypto Derivatives Platform Deribit as part of its global expansion strategy.
In a revenue call last week, CEO Brian Armstrong said he aims to make Coinbase “the number one financial services app in the world” within the next five to ten years.
Coinbase currently operates the largest cryptocurrency exchange in the United States.
