Coinbase settles with New York financial regulator for $100 million

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Coinbase The parties settled the case with the New York state financial regulator on Wednesday and will pay a $50 million fine and invest an additional $50 million in compliance. Regulators from the New York Department of Financial Services said the company had long failed its anti-money laundering program.

Shares of Coinbase surged more than 12% on news of the settlement. The company is the only publicly traded cryptocurrency exchange in the United States. Coinbase disclosed the regulatory scrutiny in its 2021 10-K filing with the SEC.

The latest enforcement action comes after state and federal regulators stepped up efforts following the November collapse of FTX, once one of the world’s largest cryptocurrency exchanges.

Big players like Grayscale Bitcoin Trust rely on Coinbase to store their assets in cold storage, and the company touts its compliance and security efforts in SEC filings and online. The exchange holds licenses in the United States and around the world.

“This settlement includes a $50 million fine and a separate commitment from Coinbase to invest $50 million in our compliance program over two years,” Coinbase Chief Legal Officer Paul Grewal said in a statement.

According to the consent order, the regulators wrote that Coinbase’s non-compliance led to “suspicious or illegal activities facilitated by the Coinbase platform.”

In one case, a Coinbase customer accused of “criminal child sexual abuse” was not flagged by Coinbase’s system when the user connected to the exchange, regulators wrote. According to regulators, the user engaged in “suspicious transactions that may have been associated with undetected, illegal activity” for more than two years. Coinbase eventually identified the user, closed the account, and reported the activity to law enforcement.

The company said it is committed to correcting issues identified by regulators. Coinbase’s leadership team has long called for greater and clearer regulation of the cryptocurrency space.

“Despite the prevailing idea that cryptocurrency companies don’t want to be regulated, many companies have been working with politicians for years,” Coinbase CEO Brian Armstrong wrote in an op-ed for CNBC. .

Coinbase, like much of the tech industry, has been forced to cut its workforce by 18% in the summer of 2022, cutting headcount and capital-intensive projects. The layoffs followed a 27% decline in user base and revenue. . Year after year.

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