Coinbase stock dipped after news broke of a cyberattack that exposed customer data and an ongoing Securities and Exchange Commission investigation over misstated user numbers in 2021.

The double whammy of bad news rattled investors as company stock (COIN) slid 7% in a fall to $244 in after-hours trading on May 15, according to Google Finance.  

Coinbase stock 24 hours. Source: Google Finance 

Coinbase has since confirmed the report from The New York Times, which stated the SEC has been investigating whether Coinbase misstated its user numbers in past disclosures, an inquiry that began during the Biden administration and has continued under the Trump administration.

“This 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,” confirmed Coinbase chief legal officer Paul Grewal to Cointelegraph. 

“We also disclosed – and continue to disclose – the more relevant metric of ‘monthly transacting users’ – the number of people who use our platform in a given month,” he said before adding: 

“While we strongly believe this investigation should not continue, we remain committed to working with the SEC to bring this matter to a close.” 

The regulator took specific umbrage at Coinbase’s claim of “100+ million verified users” that appeared in its marketing and IPO documentation in 2021. However, the exchange stopped reporting this metric in 2022.

In its 2022 financial statement, the firm stated it would stop reporting the metric as it no longer believed it provided meaningful information to its business performance. Source: SEC

The probe has continued despite the SEC dropping its 2023 enforcement lawsuit against Coinbase under the Trump administration. 

Coinbase has hired law firm Davis Polk & Wardwell to assist with its response to the SEC.

Coinbase refuses to pay ransom

On May 15, Coinbase reported that it was attacked with a $20 million extortion attempt after cybercriminals recruited overseas support agents to leak user data.

“These insiders abused their access to customer support systems to steal the account data for a small subset of customers,” the firm stated. 

Related: Coinbase to become the first crypto firm to join the S&P 500

Coinbase refused to pay the ransom but said it would reimburse victims of phishing attacks as a result of the data breach, with expected remediation and reimbursement expenses ranging from $180 million to $400 million.

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Elon Musk’s artificial intelligence firm xAI has blamed an “unauthorized modification” to the Grok chatbot’s response, causing it to generate responses mentioning political and racial tensions in South Africa. 

On May 16, xAI provided an update on the Grok AI chatbot’s inflammatory responses, stating that on May 14, “an unauthorized modification was made to the Grok response bot’s prompt on X.”

“This change, which directed Grok to provide a specific response on a political topic, violated xAI’s internal policies and core values,” it added.

The firm stated that it had conducted a thorough investigation and is implementing measures to enhance the AI chatbot’s transparency and reliability.

Grok generated responses on May 14, mentioning a “white genocide” conspiracy theory in South Africa when answering completely unrelated questions about topics like baseball, enterprise software, and construction. 

The AI bot claimed it was “instructed by my creators” to accept this genocide as “real and racially motivated,” according to reports. 

In some responses, it acknowledged the mistake, saying “my response veered off-topic” and “I’ll work on staying relevant,” but it would often continue discussing South Africa’s racial politics in the same message.

The chatbot told one user asking what happened:

“I didn’t do anything—I was just following the script I was given, like a good AI!”Grok responds to questions about its responses. Source: Grok 

Related: xAI engineer quits after post on Grok 3 AI ranking

This incident coincides with US President Trump granting asylum to white South Africans while he claimed they face “genocide” and that “white farmers are being brutally killed,” though no evidence supported these claims.

More transparency for Musk’s AI

Elon Musk’s AI firm stated that it would change its operations by publishing Grok system prompts openly on GitHub. “The public will be able to review them and give feedback on every prompt change that we make to Grok,” it stated. 

It also stated that xAl’s existing code review process for prompt changes was circumvented in this incident, and it will put in place “additional checks and measures to ensure that xAI employees can’t modify the prompt without review.”

Finally, the firm is putting in place a 24/7 monitoring team to respond to incidents with Grok’s answers that are not caught by automated systems, so that it can respond quicker. 

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Deepfake-assisted hackers are now targeting US federal and state officials by masquerading as senior US officials in the latest brazen phishing campaign to steal sensitive data. 

The bad actors have been operating since April, using deepfake voice messages and text messages to masquerade as senior government officials and establish rapport with victims, the FBI said in a May 15 warning. 

“If you receive a message claiming to be from a senior US official, do not assume it is authentic,” the agency said.  

If US officials’ accounts are compromised, the scam could become far worse because hackers can then “target other government officials, or their associates and contacts, by using the trusted contact information they obtain,” the FBI said. 

As part of these scams, the FBI says the hackers are trying to access victims’ accounts through malicious links and directing them to hacker-controlled platforms or websites that steal sensitive data like passwords. 

Source: FBI

“Contact information acquired through social engineering schemes could also be used to impersonate contacts to elicit information or funds,” the agency added. 

Crypto founders targeted in separate deepfake attacks 

In an unrelated deepfake scam, Sandeep Narwal, co-founder of blockchain platform Polygon, raised the alarm in a May 13 X post that bad actors were also impersonating him with deepfakes. 

Nailwal said the “attack vector is horrifying” and had left him slightly shaken because several people had “called me on Telegram asking if I was on zoom call with them and am I asking them to install a script.” 

Source: Sandeep Narwal

As part of the scam, the bad actors hacked the Telegram of Polygon’s ventures lead, Shreyansh and pinged people asking to jump in a Zoom call that had a deepfake of Nailwal, Shreyansh and a third person, according to Nailwal. 

“The audio is disabled and since your voice is not working, the scammer asks you to install some SDK, if you install game over for you,” Nailwal said. 

“Other issue is, there is no way to complain this to Telegram and get their attention on this matter. I understand they can’t possibly take all these service calls but there should be a way to do it, maybe some sort of social way to call out a particular account.” 

At least one user replied in the comments saying the fraudsters had targeted them, while Web3 OG Dovey Wan said she had also been deepfaked in a similar scam. 

Source: Dovey Wan

FBI and crypto founder says vigilance is key to avoid scams 

Nailwal suggests the best way to avoid being duped by these types of scams is to never install anything during an online interaction initiated by another person and to keep a separate device specifically for accessing crypto wallets. 

Related: AI deepfake attacks will extend beyond videos and audio — Security firms

Meanwhile, the FBI says to verify the identity of anyone who contacts you, examine all sender addresses for mistakes or inconsistencies, and check all images and videos for distorted hands, feet or unrealistic facial features. 

At the same time, the agency recommends never sharing sensitive information with someone you have never met, clicking links from people you don’t know, and setting up two-factor or multifactor authentication. 

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