Investors traded out of Coinbase Global (NASDAQ:COIN) on Thursday, on the back of disquieting news about a peer company. This, however, was mitigated somewhat by the release of the cryptocurrency marketplace operator's first-quarter results after trading hours.
On Thursday, Bloomberg reported that the world's largest crypto exchange operator, Binance Holdings, is under investigation by both the Justice Department and the IRS. Citing "people with knowledge of the matter," the article said that the officials conducting the investigation specialize in tax violations and money laundering.
Although Binance did not comment directly on the possible investigation, Bloomberg quoted a statement by the company's spokeswoman Jessica Jung that, "We take our legal obligations very seriously and engage with regulators and law enforcement in a collaborative fashion."
IRS and Justice officials refused to comment on the report.
Meanwhile, Coinbase delivered its first set of quarterly results following its April IPO. For its first quarter, the company's net revenue was slightly over $1.8 billion, a more than tenfold increase from the $179 million in the same quarter of 2020. Net income also snowballed, ending up at $771 million ($3.05 per share); it was $32 million in the year-ago quarter.
Both headline figures were actually a bit under the average analyst estimates of $1.81 billion for revenue and $3.09 for per-share net profit.
Regardless, those growth numbers were impressive, as was Coinbase's net profit margin. That, plus the fact that cryptocurrencies are white-hot just now, seems to have pushed those legal concerns away for at least some investors. This would explain the stock's decline during the trading day, and about-face rise after hours.