A group of cryptocurrency investors is suing Coinbase, alleging that the cryptocurrency trading platform’s lax security systems exposed their accounts to hackers.
More than 100 Coinbase users, led by Georgia resident George Kattula, filed a class-action lawsuit in the U.S. District Court for the Northern District of Georgia last week accusing the company of arbitrarily locking them out of their accounts . They allege that this prevented them from selling underperforming tokens, leading to financial losses.
“Contrary to its representations, Coinbase does not properly use standard practices to keep consumer accounts secure,” the complaint states. “And Coinbase prevents its consumers from accessing their accounts and funds inappropriately and without reason, either for extended periods of time or permanently.”
According to the lawsuit, Kattula opened a Coinbase account in January and bought $6,000 in cryptocurrency. Three months later, a thief hacked into his account and emptied it. Coinbase was able to recover $1,000 of its funds, but the rest remains missing, the complaint states.
Kattula and his fellow plaintiffs are seeking at least $5 million in damages.
Robberies on the rise
While the adoption of bitcoin, ether, and solana has exploded in recent years, the crypto market remains unregulated in the US. It has also been the target of frequent thefts.
In June, for example, hackers took about $100 million in cryptocurrency from a so-called blockchain bridge operated by Harmony, adding to the over a billion dollars in crypto has already been stolen so far this year. As of August, there was $200 million in cryptocurrency stolen in a robbery targeting the Nomad blockchain bridge. And Crypto lender Celsius Network filed for bankruptcy last month after being hacked last December for $120 million. It is unclear whether Celsius customers will be refunded their cryptocurrency.
Based in California, Coinbase is one of the few publicly traded crypto exchanges, with 103 million users, nearly 5,000 employees, and about $96 billion in assets on its platform.
Coinbase declined to comment on the lawsuit. But a spokesman said it takes extensive steps to ensure customers’ accounts are secure.
“We educate our customers on how to avoid cryptocurrency scams and report known scams to the appropriate authorities,” the spokesperson said in a statement to CBS MoneyWatch. “We encourage all Coinbase customers to protect all of their online accounts in accordance with this guidance in our Help Center.”
The case highlights how important it is for crypto exchanges to educate users about how to protect their accounts, said Joe McGill, a cybersecurity expert who runs the crypto scam reporting website Chainabuse.
Crypto exchanges have strengthened their security measures in recent years, McGill said, but it remains unclear whether the Coinbase case will have any bearing on other crypto investors seeking to return their hacked funds.
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