Inside the Coinbase Hack: 1% of Users Hit, $400M Liability Looms

The cryptocurrency exchange Coinbase has been rocked by a major security breach that has left thousands of users affected. The attack, which is believed to have occurred in recent weeks, has resulted in the theft of millions of dollars' worth of digital assets and has raised concerns about the firm's ability to protect its customers.

The Scope of the Breach

According to Coinbase, the breach affected approximately 1% of its users, although the exact number is not yet known. The attack was carried out by a group of rogue overseas support agents who collaborated with cyber criminals to gain access to sensitive user data. The attackers were reportedly paid $20M in ransom, but Coinbase declined to pay and instead formed a $20M bounty hunt for the hackers.

The Nature of the Attack

The attackers were able to access contact details such as IDs, emails, and phone numbers, as well as account balance data. However, they did not gain access to private keys, hot or cold wallets. The cyber criminals used this information to carry out social engineering attacks on Coinbase users, tricking them into releasing their digital assets.

The Impact on Users

Several Coinbase users have reported being targeted by the hackers, with some losing thousands of dollars' worth of cryptocurrency. One user, ZachXBT, a renowned Web3 investigator, has reported that $45M was stolen from Coinbase users via social engineering scams in just one week.

The Potential Liability

The Securities and Exchange Commission (SEC) has revealed that the exchange liability from affected users could be as high as $180M-$400M. This is a significant blow to Coinbase, which debuted on the S&P 500 Index this week. The firm's milestone has been marred by the hack and another SEC investigation.

The Fallout

The news of the breach has caused a ripple effect in the cryptocurrency market, with shares of Coinbase plummeting 7% to $240. This is down from its recent high and erases some of the gains linked to S&P 500 Index inclusion and broader crypto stocks rally.

What's Next

Coinbase has assured affected users that they will be reimbursed for any losses incurred due to social engineering attacks. However, the firm's reputation is still under scrutiny, with regulators probing the exchange for falsifying user numbers during its 2021 IPO preparation.

As the cryptocurrency landscape continues to evolve, it's clear that Coinbase must take immediate action to address this breach and restore trust with its users. With the SEC investigation looming, the stakes are high for the exchange.

HACKER_BLOG