Customer Sues Coinbase for his $96K Lost in a Phone Hack

A customer has sued the largest US crypto exchange Coinbase over a hack that siphoned off 90% of his life savings from the Coinbase wallet installed on his phone.

According to a Bloomberg report, Jared Ferguson from Staten Island, New York, claimed that he was the victim of a hack that transferred approximately $96,000 out of his Coinbase account. He contacted Coinbase but the exchange refused to help, saying that it is not their fault.

Coinbase says it’s not responsible for losses stemming from a security breach, according to an account holder who sued in an attempt to recover $96,000 that he says was stolen from him https://t.co/ctOoxxdDT5

— Bloomberg Crypto (@crypto) March 8, 2023

In the court filing, Jared said that on May 9, 2022, he lost mobile service on his Apple iPhone and his carrier company T-Mobile’s technical support told him to obtain a new SIM card. He did so but:

“That same day, after restoring service to his iPhone, Plaintiff checked his Coinbase account and discovered that thieves had transferred approximately $96,000 from his Coinbase wallet, 90% of his life savings.”

The plaintiff immediately contacted Coinbase support to inform them about the security incident. The exchange’s support team asked him for information about the security of his device; the last authorized transaction and a list of unauthorized transactions, only to communicate that they were not responsible, two weeks later. Coinbase stated that only customers were responsible for password breaches and other malicious activities on their devices.

Jared claims that under federal and state laws, it is obligatory for the exchange to refund his lost money in full. He further said that once notified, “Coinbase had an obligation to cancel the transfers and freeze the Account to prevent further unauthorized charges.” However, the exchange failed to fulfil any of these obligations.

Jared demanded that in addition to restitution of the stolen funds, Coinbase should pay him for attorney’s fees, damages, and other expenses.

OFAC Bug Restricts Transfers to Coinbase

On Tuesday, March 7^th, a user on Reddit reported that Bitcoin [BTC] transfers from Binance to Coinbase were blocked as an Office of Foreign Assets Control (OFAC) notice said that these funds were coming from an “OFAC sanctioned address.” The user wrote:

“So I had relatively small amount of BTC in Binance.com and decided to move that over to Coinbase. For some reason, the transaction was blocked by “OFAC sanctioned address”.

Seems that I have to fill out some OFAC form in order to Coinbase to release my BTC.

Lessons learned, do not send BTC between CEX:s.”

Many users reported the same issue in the comments. Coinbase later admitted the issue in an email to users stating that this was a technical problem and that affected accounts would be credited shortly.