Cryptocurrency exchange Coinbase (COIN) has reached a $100 million U.S. settlement with New York regulators for letting customers open accounts without sufficient background checks in violation of anti-money-laundering laws.
The settlement consists of a $50 million fine and a $50 million investment to strengthen Coinbase’s compliance program.
The compliance problems at Coinbase were first detected in 2020 after the exchange secured a license to operate in New York state, according to the New York State Department of Financial Services.
The regulator found problems with Coinbase’s anti-money-laundering controls going as far back as 2018.
By late 2021, Coinbase had a backlog of more than 100,000 alerts about potential suspicious customer transactions on its exchange that were not being properly examined, according to the Department of Financial Services.
The regulator also found that Coinbase performed only rudimentary background checks on people before letting them open accounts.
In one instance, Coinbase inadvertently helped a thief steal $150 million U.S. from an unnamed company by claiming to be an employee of that company when opening a Coinbase account.
Regulators are stepping up their scrutiny of cryptocurrency firms in the wake of the $8 billion U.S. bankruptcy of crypto exchange FTX last November.
New York was one of the first U.S. states to require cryptocurrency firms to obtain licenses before beginning operations. To date, New York has issued about 30 so called “BitLicenses.”
Coinbase’s stock has declined 84% over the last 12 months to now trade at $37.70 U.S. per share.
