Popular cryptocurrency exchange Coinbase announced an agreement Wednesday to pay $50 million to resolve a New York investigation into lapses concerning its anti-money laundering and know-your-customer practices.

The company said it would invest an additional $50 million to improve those programs.

One of the few crypto exchanges headquartered in the United States and regulated by state financial statutes, Coinbase saw explosive growth during the pandemic as the price of bitcoin soared to more than $60,000. But by the end of 2021, Coinbase had a backlog of more than 100,000 unreviewed transaction monitoring alerts and 14,000 customers requiring enhanced due diligence procedures, according to New York regulators. 

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

The agency cited two examples of how Coinbase's lapses led to real consequences. In one instance, a former Coinbase customer who had been criminally charged with crimes related to child sexual abuse material conducted suspicious transactions potentially associated with illicit activity on the exchange. Authorities said that activity occurred for more than two years before Coinbase discovered it.

Another customer was able to fraudulently identify as an employee of an unnamed corporation. Having separately gained access to that corporation's bank account, the customer was able to transfer $150 million of its funds into a Coinbase account, convert the funds into crypto and deposit the proceeds into the customer's personal crypto wallet. (Eventually, Coinbase discovered the activity and with the help of law enforcement recovered the funds.)

In a statement on its website, Coinbase acknowledged the multimillion-dollar settlement and outlined other steps it was taking to address the lapses.