Cryptocurrency alternate Coinbase has reached a $100 million settlement with the New York State Department of Financial Services after the division’s investigation revealed that Coinbase did not correctly vet customers earlier than opening an account, resulting in felony exercise on the alternate.

The $100 million settlement comes as two funds of $50 million every—one is a advantageous for failing to conduct acceptable background checks (known as a “compliance program”) on customers opening accounts. The different $50 million is an funding in bolstering their compliance program over the following two years. NYDFS discovered that Coinbase’s lackluster compliance program led to felony exercise on the alternate “including, among other things, examples of fraud, possible money laundering, suspected child sexual abuse material-related activity, and potential narcotics trafficking,” as outlined within the department’s press release.

“Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth,” mentioned Superintendent of Financial Services Adrienne A. Harris. “That failure exposed the Coinbase platform to potential criminal activity requiring the Department to take immediate action including the installation of an Independent Monitor.” 

Coinbase mentioned in a press release on the settlement that the alternate has been cooperating with the NYDFS since 2021, and that the division’s concern in regards to the alternate’s compliance program particularly dates again to 2018-2019. The DFS described Coinbase’s compliance program as “immature” and “a simple check-the-box exercise,” and additional states that the corporate did not conduct due diligence on its customers and was unable to maintain up with the platform’s rising consumer base. 

“Coinbase remains committed to being a leader and role model in the crypto space, and this means partnering with regulators when it comes to compliance and other areas,” mentioned Coinbase Chief Legal Officer Paul Grewal within the firm’s press launch. “We believe our investment in compliance outpaces every other crypto exchange anywhere in the world, and that our customers can feel safe and protected while using our platforms.”