Coinbase has been sued for not protecting customers
America’s largest crypto exchange Coinbase refuses to take responsibility for a security breach that resulted in customer loss.
On March 7, Bloomberg reported that Coinbase had refused to accept responsibility or refund a hacking victim. The company responded to an account holder who lost $96,000 last year in a lawsuit on Monday, March 6.
According to the victim, Jared Ferguson of New York, the company emailed him saying it was his fault, not theirs:
“Please note that you are solely responsible for the security of your email, your passwords, your 2FA codes and your devices,”
Ferguson sued Coinbase for losses resulting from a security breach in May 2022. “Coinbase’s email disclaimed any responsibility for hacking its customers’ accounts,” he said.
Coinbase Security Breach
The victim claims that he received an SMS message from his mobile operator regarding a SIM card change request that he did not send. When he restored service to his device the next day, he discovered that his Coinbase account had been drained. Furthermore, it contained almost all of his life savings.
Ferguson claims that under state and federal laws, Coinbase is liable for unauthorized withdrawals. Yet America’s multi-billion dollar crypto exchange thinks otherwise.
The case hinges on Coinbase’s security procedures failing to flag and contain “obviously fraudulent and unauthorized transactions,” according to the plaintiff.
He claims a new device drained the account in less than eight hours. Furthermore, this happened immediately after his password was reset from an IP address not previously associated with his account.
In 2021, a separate victim lost $7,200 from a Coinbase account in a SIM swapping attack. Again the company refused to replace the losses.
Although it is the industry leader in the US, Coinbase has often been criticized for its lack of customer support. However, it should also be noted that mainstream media such as Bloomberg have been targeting crypto exchanges recently.
Basic AML/KYC concerns
In a related development, Coinbase CEO Brian Armstrong has hinted that the new layer-2 network could be subject to anti-money laundering measures.
Armstrong told Bloomberg Radio on March 6 that Base will initially be centralized with transaction monitoring. He said:
“I think the centralized players are probably going to have the most responsibility to avoid money laundering issues and have transaction monitoring programs and things like that.”
Base is the firm’s new layer-2 network that it aims to use to integrate 1 billion web3 users. It was launched as a testnet on February 23 and is expected to be deployed to the mainnet in Q2 2023.
The company’s share price fell 2.7% on the day, with COIN changing hands at $62.85 in after-hours trading.
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Disclaimer
BeInCrypto has reached out to the company or person involved in the story for an official statement on the latest development, but has yet to hear back.
