Coinbase Global Inc (NASDAQ:COIN) enjoyed a rare rally this week following a US$100mln settlement with New York regulators over the Nasdaq-listed crypto exchange’s anti-money laundering (AML) failures.
The New York State Department of Financial Services (DFS) found significant failures in its compliance program that violated New York Banking Law and DFS regulations, exposing Coinbase to “potential criminal activity”, including money laundering, fraud, and illegal drug trafficking.
DFS called Coinbase’s know-your-customer and customer due diligence programs “immature and inadequate”, while “Coinbase’s failure to keep pace with its alerts resulted in a significant and growing backlog of over 100,000 unreviewed transaction monitoring alerts”.
Under the settlement, Coinbase will pay a US$50mln fine and commit another US$50mln to improve its compliance systems over two years.
COIN shares jumped 12% from US$33.6 to US$37.7 on Wednesday, but have since retraced 7% in Thursday’s pre-market trade.
It will take more than a settlement to bring COIN back up to par.
Over the past 12 months, shares in the company have plummeted over 83%, driven primarily by collapsing cryptocurrency prices.
Commenting on the settlement, chief legal officer Paul Grewal said Coinbase had “taken substantial measures to address these historical shortcomings and remains committed to being a leader and role model in the crypto space”.