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Coinbase Stock Tanks on SEC Probe, $20M Extortion Plot
Plus, š¦ Starknet decentralizes, š Tornado Cash dev sheds charges, ā Ripple settlement denied, š Coinbaseās hack fallout.
Hi! In todayās edition:
š„ Coinbaseās double whammy
š”ļø Starknet decentralization levels up
ā ļø Tornado Cash co-founder scores partial legal win
šļø Court shoots down Rippleās SEC deal
š Coinbase hack: Whatās the damage?

By Tikta and Steve Ehrlich
Coinbase is under investigation by the U.S. Securities and Exchange Commission over whether it misstated its user numbers in past disclosures, according to a report by the New York Times, which broke news of the case for the first time on Thursday, even though the inquiry began during the Biden administration.
The SECās probe centers on Coinbaseās claim that it had more than 100 million āverified users.ā
Coinbaseās chief legal officer, Paul Grewal, confirmed the investigation to CNBC.
āThis is a hold-over investigation from the prior administration about a metric we stopped reporting two-and-a-half years ago, which was fully disclosed to the public,ā Grewal said in a statement. āWe explained that the verified users metric includes anyone who verified their email address or phone number with us, so it may overstate the number of unique customers.
āWhile we strongly believe this investigation should not continue, we remain committed to working with the SEC to bring this matter to a close,ā he said.
The biggest U.S. crypto exchange has also been hit by a cyberattack that it says could cost it as much as $400 million.
Coinbase reported in an SEC filing on Wednesday that cybercriminals had bribed support agents abroad to steal customer data for use in social engineering attacks.
It said it had received an email on Sunday from an individual claiming that they had obtained information about certain Coinbase customer accounts and other internal Coinbase documents, including materials relating to customer service and account management systems.
Coinbaseās New York-listed shares fell more than 7% on news of the SEC probe and the hack.
Ethereum layer-2 scaling solution Starknet on Thursday reached a significant milestone by achieving āstage 1ā decentralization, as defined by Ethereum co-founder Vitalik Buterinās framework for rollup maturity.
Starknet accomplished that through the implementation of a security council and censorship avoidance mechanisms, alongside its robust validity proof system governed by smart contracts.
Its ultimate goal is to reach stage 2 decentralization, in which the network would be fully autonomous and community-governed, with no central points of control.
Starknet is currently the largest zero-knowledge rollup network by total value locked, with $629 million locked as of May, just ahead of zkSync, which has TVL of $610 million.
The criminal case against Roman Storm, co-founder and developer of Tornado Cash, will proceed to trial in July after U.S. federal prosecutors dropped some of their charges against him.
The Department of Justice decided to remove a portion of its indictment following a recent policy shift, but its core allegations remain intact.
The DOJ has dropped a charge relating to Stormās alleged failure to register as a money transmitter, citing an April memo from Deputy Attorney General Todd Blanche. The memo discourages āregulation by prosecutionā in areas in which legal requirements are unclear or where violations are unintentional.
Storm will nevertheless face trial on other charges, including conspiracy to commit money laundering, conspiracy to violate U.S. sanctions, and transmitting funds knowing they were criminally derived or intended for unlawful activity.
The dropped charge carried a maximum sentence of five years in prison, while the remaining charges each carry sentences of up to 20 years.
A U.S. federal judge has rejected the joint request by the Securities and Exchange Commission and Ripple Labs for an indicative ruling on a proposed settlement, further delaying the resolution of the long-running legal dispute between the two sides.
The motion, filed after both parties had reached a tentative agreement, sought to lift the SECās August 2024 injunction against Ripple and reduce the penalty imposed from $125 million to $50 million.
Judge Analisa Torres of the U.S. District Court for the Southern District of New York denied the motion on procedural grounds, saying it was "procedurally improper," and that both parties had failed to address the āheavy burden" required to vacate a final judgment.
Rippleās native token, XRP, dipped 5% from recent highs near $2.60 to lows around $2.35 on the news on Thursday.
Although criminals have bribed the exchangeās customer service agents and demanded a $20 million ransom, the biggest U.S. exchangeās stock has tailwinds at its back.
Nothing in cryptoās 15-year history has been easy. So itās somehow in keeping with historical precedent that during the very week that Coinbase became the industryās first company to be included in the S&P 500 index, the same firm disclosed a massive data hack that could cost it as much as $400 million in restitution to affected clients.
And this is an exchange that has, famously, never been hacked.
So, with customers rattled but Wall Street holding firm, will the hack be a temporary setback, or does it herald bigger problems ahead?

š Leaked documents have revealed that Trump-backed Movement Labs secretly promised two advisers up to 10% of its MOVE token supply without disclosure to investors, escalating internal conflicts and triggering potential legal claims worth more than $50 million.
šø Bankrupt exchange FTX will begin returning more than $5 billion to approved creditors via BitGo and Kraken starting May 30 as part of the second phase of its Chapter 11 payout plan.
š¤ The Wisconsin Investment Board exited its entire $355 million Bitcoin ETF position in BlackRockās IBIT during the first quarter, just a year after becoming the first U.S. state pension fund to gain bitcoin exposure through spot ETFs.
š Singaporeās High Court this month approved Sonic Labsā request to liquidate the Multichain Foundation to recover damages from a $210 million hack that shut down the protocol in 2023.
š¤ After Strategyās stock surged more than 20% to a year-to-date high of $421, director Jarrod Patten cashed out $5.2 million worth of shares and plans to sell $300,000 more, even as the stock dipped 3% to $403 on Thursday.

šļø KYD Labs raised $7 million in a seed round led by a16z Crypto to expand its blockchain-based ticketing platform aimed at boosting artistsā and venuesā revenue control.
š¤ Decentralized exchange aggregator 0x acquired competitor Flood, gaining custom-built trade routing software and developer talent to strengthen its position in the $2.3 billion DEX aggregation market, which is dominated by rivals such as 1inch and Jupiter.
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