Coinbase Faces Legal Challenges Following Data Breach
Coinbase is currently facing a series of legal challenges after announcing a significant breach of its user data. The cryptocurrency exchange revealed on May 15 that it had been targeted by cybercriminals who attempted to extort the firm for $20 million. In this incident, some customer support agents were allegedly bribed, allowing hackers access to internal systems and a limited trove of user data. This compromised information included personal details of millions of users, such as:
- Names
- Addresses
- Phone numbers
- Email addresses
- The last four digits of Social Security numbers
- Bank account identifiers
- Driver’s licenses
- Passports
- Data on account balances and transaction history
Legal Complaints Filed by Users
The aftermath of this breach has led users to file at least six lawsuits against Coinbase between May 15 and May 16. The legal complaints, including one by New York resident Paul Bender, argue that the company failed to establish adequate security measures to protect sensitive information and that its response to the breach was inadequate and poorly managed. Bender’s case contends that the failure to effectively safeguard user data exposes individuals to ongoing risks of identity theft and financial fraud.
“Coinbase did not prioritize user data security sufficiently.”
Legal filings highlight claims from other plaintiffs in two additional lawsuits also lodged in a New York federal court, which echo this assertion. One complaint goes further to accuse Coinbase of unjust enrichment due to its lack of investment in robust security protocols. All groups seeking damages emphasize the need for measures to secure users’ sensitive information effectively.
A fifth lawsuit, initiated in California, includes calls for the court to mandate that Coinbase delete sensitive user data it holds and engage third-party security specialists to evaluate its security systems.
Company’s Response and Market Reaction
In response to these allegations, a representative from Coinbase did not directly address the lawsuits but referred to a blog post outlining the company’s stance on the data breach. Coinbase has firmly stated its refusal to meet the ransom demand and indicated plans to reimburse users who may have fallen victim to phishing schemes as a result of the breach. The company estimates that these reimbursement costs could range from $180 million to $400 million, according to filings with the US Securities and Exchange Commission.
In light of the data breach revelation, Coinbase’s stock experienced a 7% decline, dropping to $244. However, by the market close on May 16, shares had rebounded slightly, closing at $266, following a 9% spike. Additionally, after the breach, Coinbase terminated several customer support employees in India for alleged involvement in the hacking scheme.
