Coinbase’s S-1 registration statement filing has revealed details of a number of regulatory investigations involving the exchange in recent years.
The filing, a key step on the firm’s path towards a direct listing on the Nasdaq exchange, provided a significant inside look of the business.
A section on legal proceedings confirmed reports from 2017 that as part of an investigation into the so-called “flash crash” in ETH, the Enforcement Division of the Commodity Futures Trading Commission (CFTC) issued subpoenas to Coinbase staff.
“During the course of its investigation, the CFTC has issued subpoenas to us and certain of our directors, executive officers, and former employees, including testimony subpoenas, and other requests for information. We are cooperating fully with the investigation,” the filing stated.
The market event occurred when, in June 2017, the price of ETH fell from $319 to 10 cents in seconds. Coinbase later said that it would use company funds to reimburse affected users, as reported at the time.
This investigation, which appears to be ongoing, covers the sharp volatility in ETH market seen in 2017, trades made in the same year by a former Coinbase employee, the listing of Bitcoin Cash on the Coinbase platform and “the design and operation of certain algorithmic functions related to liquidity management on our platform.”
Several other legal proceedings and regulatory investigations were disclosed in the filing.
In December 2019, the Attorney General for the State of California issued an investigative subpoena to Coinbase for documents relating to its “business practices and policies, business practices and policies, customer complaints, asset launches, and certain of our ongoing litigation.”
The Attorney General for the State of Massachusetts issued a similar subpoena in September 2020.
Details of a Securities and Exchange Commission subpoena issued in December 2020 were also disclosed in the filing. This subpoena sought information about Coinbase’s customer programs and operations.
In the latest instance, in January 2021, the California Department of Fair Employment and Housing issued an investigative subpoena seeking documents related to the exchange operator’s business practices and policies.
Coinbase said of the investigations in its filing:
“We intend to cooperate fully with such investigations. We are not presently a party to any other legal or regulatory proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows."