Investing.com -- Shares of Coinbase (NASDAQ: NASDAQ: COIN ) dropped 6.5% after reports emerged that the Securities and Exchange Commission (SEC) is investigating the cryptocurrency exchange for potentially misstating its user numbers. The New York Times (NYSE: NYT ) reported that the SEC’s inquiry, which began during the Biden administration and has continued under the Trump administration, is examining figures previously disclosed by Coinbase claiming to have over 100 million "verified users."

The SEC’s investigation is said to focus on whether Coinbase provided accurate user metrics in its securities filings and marketing materials. This key metric was highlighted in the company’s initial public offering document back in 2021, but Coinbase ceased referencing it approximately two years later. Despite the SEC not commenting on the existence of the investigation, Coinbase has acknowledged the situation and has engaged the law firm Davis Polk & Wardwell for assistance.

Coinbase’s Chief Legal Officer, Paul Grewal, stated that the SEC’s investigation concerns a metric that the company has not reported for over two years. Grewal expressed confidence that the investigation should not continue but conveyed Coinbase’s commitment to cooperating with the SEC to resolve the issue.

The downturn in Coinbase’s shares reflects investor concerns over the potential implications of the SEC’s findings. Legal scrutiny can often lead to fines, operational changes, or damage to a company’s reputation, factors that can adversely affect stock performance.