Coinbase’s Tumultuous Autumn: Potential $

Coinbase Faces Data Breach After Hackers Recruit Overseas Support Staff

On May 15, Coinbase, the U.S. cryptocurrency exchange, reported that hackers had bribed overseas customer service personnel to steal user identity information and initiate social engineering scams, further demanding a ransom of $20 million in Bitcoin. Coinbase refused to pay the ransom and instead offered a reward of the same amount to track down the perpetrators, leading to concerns about its cybersecurity, with estimates suggesting a need for $180 million to $400 million for compensation and follow-up actions.

Customer Data Leaked by Compromised Support Staff, Estimated Compensation Nearing $400 Million

In a filing submitted to the U.S. Securities and Exchange Commission (SEC) on May 15, Coinbase admitted that overseas customer service personnel were financially incentivized by hackers to illegally leak customer information, including addresses, phone numbers, email addresses, and sensitive identification details, which became tools for social engineering scams.

Cyber criminals bribed and recruited rogue overseas support agents to pull personal data on <1% of Coinbase MTUs. No passwords, private keys, or funds were exposed. Prime accounts are untouched. We will reimburse impacted customers. More here: https://t.co/SidVn59JCV

The company has yet to clarify the timeline of the incident or the number of victims, only stating in a statement: “This data breach affects approximately 1% of Coinbase’s monthly active trading users.”

In response, external estimates suggest that the incident could incur expenditures of $180 million to $400 million, primarily for user compensation and system recovery. This figure does not include potential lawsuits, insurance claims, or outcomes related to the recovery of assets, leaving the actual costs subject to change.

Refusing to Pay Ransom, Coinbase Offers Reward for Hacker’s Capture

Coinbase’s statement indicated that after obtaining the data, hackers attempted to extort Coinbase for $20 million in Bitcoin in exchange for user information. Coinbase not only refused to pay but also proactively offered a reward of the same amount to catch the masterminds, marking the highest bounty in the history of the cryptocurrency industry.

Coinbase CEO Brian Armstrong also recorded a video emphasizing, “The company has reported the case and is cooperating with law enforcement, while also initiating a compensation mechanism for affected users.” The leaked data did not include user passwords, private keys, or Coinbase Prime account information, and funds remained secure.

Coinbase Strengthens Internal Controls, Moves Customer Support Out of High-Risk Areas

In light of serious cybersecurity concerns, Coinbase’s Chief Security Officer Philip Martin stated that all implicated support staff were located in India and were immediately terminated following the incident. He emphasized that the company will focus more on user data protection, enhancing employee training and review mechanisms:

We will comprehensively review internal data management and customer service processes, and consider establishing overseas customer service centers to prevent similar incidents from occurring. He added, “In the future, we will restrict the scope of customer service access and introduce more monitoring measures to prevent abuse.”

ZachXBT Warned Early: Social Engineering Scams Rampant, Coinbase’s Crisis Awareness Lacking

As early as February of this year, on-chain detective ZachXBT warned that recent Coinbase users had lost over $65 million due to social engineering scams within just two months, with potential annual losses reaching $300 million, criticizing Coinbase for failing to take sufficient measures to protect users:

These attackers often impersonate official calls, emails, and websites, asking users to verify account security to lure victims into transferring assets to fraudulent addresses falsely claimed to be “Coinbase Secure Wallets.”

(Scam Hotspot? ZachXBT Exposes Coinbase’s Slow Response, Allowing Users to Lose Over $60 Million)

Following this incident, the cryptocurrency community also reported receiving fraudulent contacts impersonating Coinbase officials.

SEC Reopens Investigation, Questions Coinbase’s User Count During IPO

In addition to the cybersecurity crisis, Coinbase is currently under SEC investigation regarding whether it exaggerated user numbers during its 2021 IPO. The New York Times reported that the SEC is examining claims made in Coinbase’s registration documents at that time, which stated it had over 100 million “verified users,” a figure that was later ceased from disclosure in 2023.

Coinbase’s Chief Legal Officer Paul Grewal believes that “this investigation is a continuation of the previous administration’s era” and should not continue.

The term “verified users” includes all registered accounts, non-custodial wallet users, and partners, but the statistical method no longer reflects the actual active user status, leading to a shift in disclosure toward “monthly active trading users” data.

The Storm is Not Over: Coinbase Faces Dual Tests of Trust and Regulation

Coinbase’s revelation and response to this cybersecurity incident have received mixed reviews from the community and media. On one hand, users and industry professionals commend its refusal to compromise and proactive reporting; on the other hand, many criticize Coinbase for not promptly informing users about the risks of data breaches.

Wintermute CEO Evgeny Gaevoy commented on X: “Coinbase’s failure to disclose this incident sooner is the dark side of our current absurd KYC/AML system.” This cybersecurity incident and data investigation not only severely damaged Coinbase’s reputation but also exposed structural issues within the cryptocurrency industry regarding “centralized customer service” and “user data protection.”

Faced with SEC regulatory pressure and a crisis of user trust, whether Coinbase can restore confidence through its bounty pursuit and compensation mechanism will be a key test of its ability to maintain its market leadership.

Risk Warning

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