Coinbase, one of the largest cryptocurrency exchanges in the United States, has recently faced a series of major setbacks. In addition to disclosing a hacker attack that could result in losses of up to $400 million, the company has confirmed that it is under investigation by the U.S. Securities and Exchange Commission (SEC) regarding the “authenticity of user data”.
In a recent announcement, Coinbase revealed that hackers claimed to have obtained data from less than 1% of users by bribing some of its employees and contractors. They then used this information to impersonate Coinbase and defraud users of their crypto assets. The hackers demanded a $20 million ransom as hush money, which Coinbase refused to pay. Instead, the company promised to compensate affected users and announced the establishment of a $20 million reward fund to encourage providing clues for capturing those involved.
The company stated that this incident could result in losses ranging from $180 million to $400 million, covering user compensation and system repairs. Employees implicated in the breach have been terminated. Coinbase also advised users to remain vigilant and guard against potential future fraudulent attacks, emphasizing that the company will never ask for passwords or asset transfers from users.
This incident occurred just days before Coinbase was set to join the S&P 500 index. Following the announcement of this news, Coinbase’s stock price plummeted over 4%.
While the fallout from the hacking incident was still ongoing, on Thursday (May 15), Coinbase confirmed that it is under investigation by the SEC regarding its past claim of having “over 100 million verified users”. Upon this news, Coinbase’s stock price dropped again, falling by over 7% at one point.
According to CNBC, this investigation actually began during the Biden administration and has continued under the relatively crypto-friendly SEC of the Trump administration. Coinbase’s Chief Legal Officer, Paul Grewal, stated that the relevant metric had been discontinued over two and a half years ago, and the company had previously explained that the term “verified users” only referred to those who completed email or phone verification, not necessarily active or independent users.
He emphasized that the company has now switched to using “monthly active trading users” as the primary metric and is cooperating with the SEC, hoping to conclude the investigation soon.
The consecutive negative news has dealt a heavy blow to Coinbase’s stock price. Despite this, the company remains optimistic about the future, recently announcing an acquisition that will aid in expanding its global business and is expected to officially be included in the S&P 500 index next week, further solidifying its position in the mainstream financial market.
CEO Brian Armstrong stated in the latest earnings conference that the company aims to establish Coinbase as the “premier financial services application globally” within the next 5 to 10 years.
However, the recent hacker attack has highlighted the security challenges facing the cryptocurrency industry. With the industry rapidly evolving, it is facing increasingly complex attacks from cybercriminals. This attack may impact confidence in the cryptocurrency market.