The Securities and Exchange Commission (SEC) dismissed its 2023 lawsuit accusing Coinbase of violating the law by offering crypto assets for sale without registration. However, that wasn’t the culmination of its legal woes.
The SEC is quietly investigating whether Coinbase misled investors about how many users it really had. Specifically, the focus is on a number Coinbase used to promote itself, saying it had over 100 million “verified users.” This figure showed up in official documents when Coinbase went public in 2021, but the company stopped using it two years later.
Sources say this investigation began under the Biden administration and has continued under Trump. Coinbase has been in touch with the SEC this year and brought on a major law firm, Davis Polk & Wardwell, to help it respond. After his move to the SEC, the Coinbase shares fell sharply by 7% today.
Paul Grewal, Coinbase’s top lawyer, said the inquiry is “a holdover” from the previous administration and that the company stopped using that metric over two and a half years ago. He added that they don’t think the investigation should continue, but they’re cooperating to wrap it up.
Despite President Trump’s SEC having been more crypto-friendly, it has dismissed several cases since January. The agency still has work to do, such as ensuring public companies do not deceive investors. Investigators have been interviewing former employees of Coinbase to learn more about how that user count was achieved.
Coinbase is currently valued at more than $60 billion and was just added to the S&P 500, but on the same day, the company announced a critical data breach that could cost up to $400 million to repair.
The “verified user” number has come under scrutiny because, although Coinbase stated it had more than 100 million customers, the small print qualified the fact that an individual may hold numerous accounts. In 2023, the company ceased to report the figure altogether, stating it did not represent how the business was operating.
Instead, Coinbase now discloses how many users actively trade per month, a more useful number. It’s hard to know what will become of the probe — it could just fizzle out without any action. But for now, even with political currents blowing in Coinbase’s direction, the SEC’s work isn’t finished.
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