Coinbase is paying a $50 million fine over allegations it fell behind on a mountain of internal warnings

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Coinbase is paying a $50 million fine over allegations it fell behind on a mountain of internal warnings
Coinbase agreed to a $100 million settlement with a New York state agency on Wednesday.Photo by Jakub Porzycki/NurPhoto via Getty Images
  • Coinbase is paying a $50 million fine after a New York agency found fault with its crypto platform.
  • It will also invest $50 million into improving its own vetting of customers and transactions.
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Coinbase has agreed to a $100 million settlement with a New York financial agency that said the crypto exchange fell behind on acting on a mountain of internal warnings about potentially problematic transactions on its platform.

The settlement, which the New York Department of Financial Services disclosed on Wednesday, includes a $50 million fine, and also calls for Coinbase to spend another $50 million on a monitoring plan overseen by the agency.

The agency, which has been investigating the crypto exchange since 2020, said it found that Coinbase hadn't kept up with some 14,000 customers that needed additional vetting and 100,000 monitoring alerts on its platform as of December 2021. Coinbase, a crypto exchange founded in 2012, has more than 100 million users on its platform.

The agency said that the platform had allowed in new users with "a simple check-the-box exercise" rather than the more robust background checks required to prevent those charged with serious crimes from misusing its platform.

Those practices left the company "overwhelmed, with a substantial backlog of unreviewed transaction monitoring alerts, exposing its platform to risk of exploitation by criminals and other bad actors," according to the agency's consent order posted on Wednesday.

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Coinbase, which said it has been working with the financial regulators in their investigation, said it's created new programs to protect against money laundering on its platform and to evaluate the risk posed by certain types of customers.

"Coinbase has taken substantial measures to address these historical shortcomings and remains committed to being a leader and role model in the crypto space, including partnering with regulators when it comes to compliance," Coinbase's chief legal officer Paul Grewal said in a statement.

Coinbase also acknowledged the publicity around crypto companies in the past year, which has seen the bankruptcies of platforms including Voyager, Celsius and FTX, whose founder Sam Bankman-Fried is facing serious criminal charges and potential jail time if he pleads guilty or is convicted in a trial.

"We recognize that the crypto industry is at an inflection point right now and that every public move by a crypto company will receive intense scrutiny," Grewal wrote in a blog post Wednesday. "That is one of the reasons why we knew it was important to bring this matter to a conclusion, even though it is never the type of agreement reached lightly."

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