A group of investors is suing popular crypto exchange Coinbase after alleged claims of poor security practices came forward. The investors are claiming that Coinbase exposed its accounts to potential hackers as it didn’t have the necessary security controls.
Concerning this news, the exchange’s Chief Security Officer Phillip Martin has issued a statement to British news tabloid ‘The Evening Standard. Following was his official statement –
We see threats of all shapes and sizes …we see attacks on protocols, we see hackers looking at smart contract vulnerabilities and looking for ways to exploit those. We’ve built a whole organisation within my team…to ensure we are ahead of the curve.Chief Security Officer Phillip Martin
Martin also expressed that such events are mostly down to the lack of user awareness. He emphasized that the platform has all required security controls to prevent illicit access and exfiltration of user funds. However, the overall security posture of a crypto exchange depends on the user as much as it does on the organization.
Although Martin denied any direct statement regarding the lawsuit, he implied that inconsistent and irresponsible handling of digital assets could lead to threat actors exploiting vulnerabilities. Through this statement, the company indirectly shifted the blame to the affected users rather than taking on any liability in relation to the lawsuit.
Why is Coinbase being sued?
The lawsuit is being led by a Georgia state resident named George Kattula. Over 100 Coinbase users have filed a class action lawsuit against the company in the US District Court. The users are accusing the company of illegally locking their accounts and restricting them from selling their underperforming assets. This eventually led to the users experiencing significant losses after the crypto market suffered massive liquidation last week.
The filed lawsuit also claims that Coinbase doesn’t follow standard security practices to safeguard their customer accounts. It also alleges that the exchange randomly suspends crypto withdrawal and sells options without any viable reason or notice.
According to the leading plaintiff Kattula, he opened an account with the exchange earlier this year and purchased around $6,000 worth of different tokens. A hacker could access his account and steal all funds three months later. Coinbase was only able to recover $1000 worth of his funds. The exchange has since deemed the remaining assets “unrecoverable.”
Other plaintiffs of the case have also alleged to have experienced similar incidents. Overall, the victims are seeking $5 million in damages.
Crypto heists continue to rise
Although bitcoin and other digital assets have soared into popularity and adoption in recent years, the larger crypto market still remains unregulated in most countries. Also, as the decentralized space is still a relatively new innovation, conventional security solutions and controls cannot safeguard such platforms from sophisticated attacks.
Crypto hacks have recently become common news every month. In June, hackers stole $100 million worth of cryptocurrencies from Harmony’s blockchain bridge. This month, the Nomad blockchain bridge suffered a $200 million hack. Also, major crypto lending network Celsius filed for bankruptcy earlier this year, following a massive $120 million last December.
Overall, the crypto industry has already had more than $1 billion stolen this year, with the last quarter of the year still remaining. Most victims of these hacks don’t tend to recover most of their funds. It remains to see whether Coinbase can take effective measures to get ahead of such incidents soon.