Coinbase, one of the largest cryptocurrency exchanges in the U.S., saw its stock plummet by 7% on Thursday following two major pieces of news that raised serious questions about its business operations and regulatory standing. A cyberattack exposed sensitive customer data, while the SEC investigation into potential misreporting of user numbers brought additional scrutiny. This combination of security issues and regulatory pressure has left many wondering how Coinbase will recover.

Domenic Hernandez, a senior financial analyst at Zxperts, takes a closer look at the events surrounding the company, what they mean for its future, and what investors should watch moving forward.

The Cyberattack: Data Leak and Ransom Demands

Coinbase’s cyberattack incident hit the company hard, both in terms of reputation and finances. Hackers stole customer data, including sensitive personal information like names, emails, addresses, and Social Security numbers. The attackers also made a $20 million ransom demand. Coinbase responded by stating that no passwords or private wallet keys were compromised, and the breach only affected less than 1% of monthly transacting customers.

To address the incident, Coinbase announced that it would not pay the ransom. Instead, the company is establishing a $20 million reward program to track down the attackers. Brian Armstrong, Coinbase’s CEO, emphasized the company’s commitment to reimbursing affected customers and said, “No, we’re not going to pay your ransom.”

Despite these efforts, the financial implications of the breach are considerable. Coinbase estimated that the overall cost of this attack, including the reward program and customer reimbursements, could range from $180 million to $400 million. This figure highlights the significant financial burden the company faces in the aftermath of the attack.

SEC Investigation: Regulatory Pressures Continue

Adding to Coinbase’s woes, the Securities and Exchange Commission (SEC) is still investigating whether the company misreported its user numbers in the past. This investigation centers around Coinbase’s “verified user” metric, which was included in its initial public offering (IPO) filings. The SEC’s ongoing inquiry suggests that the exchange might have overstated the number of users on its platform, a matter that could have significant regulatory and financial implications.

In response to the investigation, Coinbase has explained that the verified users metric was always publicly disclosed and clarified that it may have overstated the number of unique customers. 

According to Paul Grewal, Coinbase’s chief legal officer, the metric included anyone who verified their email or phone number, which made it less reliable for assessing the true scale of the platform. Coinbase stopped using this metric in 2023 in favor of reporting monthly transacting users, which provides a more accurate reflection of platform engagement.

However, despite this explanation, the ongoing SEC investigation suggests that Coinbase is still under a microscope, even after a previous enforcement case was dropped earlier this year.

The Market Reaction: A Setback for Coinbase

Coinbase’s stock took a hit in response to these twin challenges. COIN stock closed down 7%, as investors reacted to the news of both the cyberattack and the SEC investigation. This represents a sharp reversal after a period of strong growth earlier in 2025, when the company was making headlines for its $2.9 billion acquisition of crypto options exchange Deribit and its S&P 500 inclusion. These earlier developments had investors optimistic about the future of the company and its role in mainstream finance.

Despite the setbacks, Coinbase remains a significant player in the cryptocurrency market, and its position as the largest U.S.-based exchange makes it an essential component of the crypto ecosystem. Still, these recent events serve as a reminder that even market leaders face hurdles, particularly when it comes to security breaches and ongoing regulatory scrutiny.

What Investors Should Watch

For investors considering their next moves regarding Coinbase, Domenic Hernandez of Zxperts highlights several critical factors to monitor:

• SEC Developments: Any further actions by the SEC regarding the investigation could have major implications for Coinbase’s future financial reports and stock performance.
• Cybersecurity Measures: The company’s ability to recover from the cyberattack and strengthen its security infrastructure will be crucial for maintaining investor confidence.
• User Growth and Engagement: Coinbase’s shift to reporting monthly transacting users could provide a more accurate picture of the platform’s health. Continued growth in this metric will be vital for Coinbase to demonstrate its market dominance.
• Regulatory Environment: As the cryptocurrency sector continues to face growing scrutiny, how Coinbase responds to regulatory changes and compliance requirements will be pivotal for its long-term success.

Final Thoughts: A Difficult Road Ahead

Coinbase’s recent troubles illustrate the challenges that come with being a major player in the volatile world of cryptocurrency. The cyberattack and SEC investigation are significant setbacks, but Coinbase’s response to these issues, such as the $20 million reward program and its efforts to engage with regulators, shows a proactive approach to managing crises.

That said, investors should remain cautious as the company works through these challenges. While Coinbase has a solid market presence and continues to make strategic moves, its path forward will depend on how effectively it manages security concerns and navigates regulatory scrutiny.

As always, keeping an eye on the SEC’s decisions, the company’s security updates, and user engagement trends will be crucial for anyone tracking Coinbase’s financial future.