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Coinbase Settles for $100 million with NY Regulator

Steve Miley trader
Updated 5 Jan 2023

In a $100 million settlement, the US-based cryptocurrency exchange, Coinbase (NASDAQ: COIN) is to pay a $50 million fine to the New York State Department of Financial Services (NYDFS) and will pay another $50m to enhance compliance.

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Coinbase Fined $50 million

The US-based cryptocurrency exchange, Coinbase has agreed to a $50 million fine from the NYDFS to settle charges that it allowed users to open accounts without running adequate background checks. The fine came amid allegations that the crypto exchange broke numerous anti-money laundering laws. The regulators in New York discovered that Coinbase had “wide-ranging and long-standing failures” regarding the exchange’s program for anti-money laundering, possibly allowing the platform to be at risk of “series criminal conduct.

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YOUR CAPITAL IS AT RISK. 68% OF RETAIL CFD ACCOUNTS LOSE MONEY

According to the NYDFS, Coinbase was not able to stay on top of the number of alerts from its system that monitors transactions, which was meant to identify suspicious activity on the platform. It is alleged that Coinbase accumulated a bottleneck of over 100,000 alerts, which resulted in a failure in investigating and reporting and suspicious transactions. Because of this, the New York regulator assigned an impartial monitor in 2022, in order to evaluate the practices of the cryptocurrency exchange. In addition, the NYDFS will further its work with Coinbase for 2023.

Plus $50 million of Compliance Investment

The second $50m is to improve compliance, by looking to block possible criminals that may look to use the exchange.

In a response, Coinbase posted on its website that it’s “always willing to acknowledge where we have fallen short” and it welcomes “opportunities to improve our programs.” They went on to add, “Coinbase remains committed to being a leader and role model in the crypto space, and this means partnering with regulators when it comes to compliance and other areas,” the company writes. “We believe that New York — and the broader industry — needs more crypto players committed to compliance and working with regulators.”

In a statement from NYDFS superintendent Adrienne Harris, she highlighted that “Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth,” adding “That failure exposed the Coinbase platform to potential criminal activity.”

Increasing Crypto Scrutiny post-FTX Collapse

The increased scrutiny on Coinbase and other cryptocurrency exchanges comes amid the ongoing fallout from the collapse of the second largest global crypto exchange, FTX. This week saw Sam Bankman-Fried, the former CEO of FTX, officially deny charges that he defrauded investors and customers, as on Tuesday he pleaded not guilty to criminal charges in the US District Court in New York.

Furthermore, this week also saw the US Federal Reserve, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation issued their first ever joint warning to banks over the risks posed by the crypto market. Clearly, the trend of regulating the world of decentralised finance is only going to intensify into 2023 and beyond.


YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Steve has 29 years of financial market experience including 3 years at Credit Suisse and 15 years at Merril Lynch. Steve is the Academic Dean for The London School of Wealth Management and has won many awards from Technical Analyst Magazine.