The US Department of Justice is investigating the recent insider hack of Coinbase (NASDAQ:COIN), according to Bloomberg. Coinbase is said to have brought the breach to the authorities’ attention, but the company itself is not under investigation. Paul Grewal, Coinbase’s Chief Legal Officer, highlighted this fact after the news broke.
Earlier this week, Coinbase revealed in a blog post that certain information was pilfered from the crypto exchange due to an infiltration aided by insiders. The company stated that the employees involved have been fired. Coinbase reported that the attack affected less than 1% of its monthly transacting users.
While login credentials were not exposed, other important personal information was taken.
Yesterday, Michael Arrington, a well-known investor and founder of TechCrunch, publicly posted on X that he worries the cost to Coinbase will be greater than $400 million.
Arrington stated:
“I am a long time investor in and champion of Coinbase. Something that has to be said though – this hack – which includes home addresses and account balances – will lead to people dying. It probably has already. The human cost, denominated in misery, is much larger than the $400m or so they think it will actually cost the company to reimburse people. The consequences to companies who do not adequately protect their customer information should include, without limitation, prison time for executives. Very disappointed in Coinbase right now. Using the cheapest option for customer service has its price. And Coinbase’s customers will bear that cost.”
Arrington also referenced another post advocating for firms to host hackable information no longer which is currently required under existing KYC/AML rules.
“The stated intent of these laws is to reduce money laundering, but what they are really about is tracking the tax donkeys and ensuring that revenue is maximized,” said Arrington.
CI published some insider feedback which lamented the overall state of the sector, which must do more to protect its user data:
“[This] is a clear warning that the crypto industry remains vulnerable to insider threats, this time because of operational weaknesses.”
While Coinbase did move quickly to reveal the hack in which the perpetrators sought a ransom, this does not alleviate the current security risk and the harm done to the impacted Coinbase users.