Coinbase’s (NASDAQ: COIN) “Stand With Crypto” Political Action Committee (PAC) is under scrutiny following revelations that its fundraising claims significantly overstate the grassroots support it purportedly enjoys. While the PAC claims to have raised millions from a broad base of crypto advocates, a closer examination reveals a different story.

The “Stand With Crypto” PAC, launched by Coinbase to rally support for cryptocurrency-friendly legislation, claims to have garnered $179 million from over 1.2 million crypto advocates.

However, recent Federal Election Commission (FEC) filings tell a different tale. According to the FEC’s latest quarterly report, the PAC raised only $13,690 from seven individual contributors since its inception. Of these seven donors, two are employed by the PAC, and another two work for Coinbase.

Cryptocurrency critic and researcher Molly White has been vocal about these discrepancies. “Coinbase has tried to portray its Stand With Crypto PAC as having grassroots support among over 1M ‘crypto advocates,’ and boasts that it has raised $180M. Its first FEC filing reveals it has had only $13,690 in contributions from 7 people since its creation,” she posted on X.

Further complicating matters, the PAC’s website claims that $177.88 million of the total funds were raised by Fairshake, a pro-crypto Super PAC, and only $1.47 million directly by Stand With Crypto. These figures were included in the overall fundraising totals, leading to accusations of misleading representation.

White highlighted these issues in another post: “After my reporting about the falsified donations amount, the PAC added a tooltip that acknowledges that $177.8 million (99%) of the ‘donations by crypto advocates’ are actually the multi-million dollar donations by a handful of big crypto companies.”

The situation raises concerns about transparency and the potential misuse of funds. White questioned the clarity of the PAC’s donation process, suggesting that most contributions might be going to the broader Stand With Crypto organization, a 501(c)(4) entity, rather than the PAC itself. This distinction is significant because 501(c)(4) organizations are not required to disclose their donors, unlike PACs, which must report all contributions to the FEC.

The potential for confusion is evident in the PAC’s online presence. “The organization, a 501(c)(4), does not have to disclose its donors,” White pointed out, citing OpenSecrets, a nonpartisan research group tracking money in U.S. politics. OpenSecrets explains, “501(c) organizations can operate without incurring tax liability. Another major benefit, for many groups, is the ability to collect donations without disclosing donors.”

The scrutiny of Coinbase’s PAC is not without precedent. Political action committees and similar entities often face criticism for their funding practices and the transparency of their operations.

Stand With Crypto was launched by Coinbase last summer as a 501(c)(4) nonprofit organization aimed at providing cryptocurrency enthusiasts with better access to information about policymakers and candidates.

“This is a grassroots, organic bottom-up effort,” Kara Calvert, Coinbase’s head of US policy, said in August 2023 when announcing the initiative. “It can provide a lot of tools to people, they can learn about the members of Congress, they can access a scorecard, they can access a legislative action portal…it will really give them the tools that they need to engage with their members of Congress.”

Despite the initial promise, the PAC’s fundraising efforts have raised questions about its true level of grassroots support. Contributions to the PAC are limited to $5,000 per individual, while donations to the nonprofit arm are unrestricted. This has allowed large corporate donors to contribute significant amounts to the nonprofit, which are then reported as part of the PAC’s fundraising totals.

Information for this briefing was found via Blockworks and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.