According to a recent Bloomberg report on March 7, Coinbase has once again declined to take responsibility or provide any refund to a victim of a security breach. The company’s response to a court filing by an account holder who lost ninety-six thousand dollars early last year was submitted on Monday, March 6.
The hacking victim, Jared Ferguson, based in New York City, filed a lawsuit against Coinbase in May 2022 over the losses incurred due to a security breach in the Coinbase system. According to Jared Ferguson, the company sent him an email claiming that it was the user’s fault, not the company’s.
Thus, Coinbase shall not repay him for any losses he incurred. Furthermore, the email stated that the company had previously advised that every user should bear full responsibility for ensuring the security of their passwords, emails, registered devices, and 2FA codes. Therefore, Coinbase refused to bear any responsibility for the breach in its system.
Security Shortcomings in Coinbase
The affected individual, Ferguson, alleges that he received an SMS notification from his mobile carrier about a SIM card change prompt that he did not initiate. After regaining service to his device the next day, he realized that his Coinbase account had been sucked dry, and nearly all his life savings were gone.
Following state and federal legislation, Jared Ferguson argues that Coinbase is accountable for unauthorized withdrawals. However, the multi-billion-dollar cryptocurrency exchange in the United States of America disagrees with this assertion that Coinbase should take responsibility for his losses and not him because they are the service providers.
According to the complainant, the lawsuit centers on Coinbase’s security protocol’s failure to identify and halt transactions that were “clearly fraudulent and unauthorized.”
Ferguson alleges that a new undetected device siphoned his account within less than eight hours. Moreover, this happened just after his password was changed, without authorization, from an IP address that had not been previously linked to his account and emails.
Despite being the leading US crypto industry, Coinbase has frequently faced criticism for its inadequate customer service. Nonetheless, it is worth mentioning that mainstream media organizations like Bloomberg have recently been scrutinizing cryptocurrency exchanges.
Another security breach victim reported in 2021 that he lost seven thousand two hundred dollars from his Coinbase account due to a SIM swap attack. Once again, the corporation declined to compensate for the damages. Instead, they claimed it was not the company’s responsibility or mistake.
Coinbase KYC and AML Requirements
In a connected development, Brian Armstrong, the CEO of Coinbase, has suggested that their latest layer-2 network might be susceptible to anti-money laundering regulations.
The base is the company’s recently introduced layer-2 network, unveiled as a test net on February 23 and scheduled to be rolled out to the main net in 2023. It is intended to be utilized for enrolling one billion web3 users.
Armstrong stated on March 6 during an interview with Bloomberg Radio that Base would start as a centralized platform with transaction monitoring to avoid money laundering issues in the future.
The firm experienced a 2.7% decline in its stock price for the day, with Coinbase traded at sixty-two dollars and eighty-five cents during after-hours trading.
According to Armstrong, the centralized actors will likely bear the greatest responsibility for preventing money laundering problems and implementing transaction monitoring measures and similar protocols.
