A Federal Class Action lawsuit was launched against Coinbase to prevent the theft of crypto user accounts. The plaintiffs allege that their Coinbase digital wallets were emptied of cryptocurrency and that the exchange refused to compensate them.
According to attorneys at BraunHagey & Borden LLP, Coinbase misrepresents itself as having never been hacked and having completely secure digital wallets. In actuality, however, the plaintiffs argue that the platform’s account security network is very susceptible to assault and that Coinbase has routinely failed to prevent several breaches resulting in customer losses.
The new breaches occurred less than a year after the exchange paid a whopping $300 million to resolve identical charges brought by the California Attorney General. Plaintiffs are dissatisfied with the company’s indifference to customer losses.
When plaintiffs contacted Coinbase for assistance:
“It routed them through its automated complaint processing—a recursive loop of impenetrable screens that prevented them from explaining their situation to any human being and was incapable of redressing the theft of their savings.”
Among other solutions, plaintiffs now demand civil and punitive damages, restitution, and injunctive relief.
Coinbase user criticises “impenetrable screens.”
One Coinbase account user reported that it took him many days to reach customer service after the crooks emptied his whole account before he received assistance.
At this point, at least $200,000 in crypto money had been stolen from Manish Aggarwal’s account, according to his legal team’s proposed class-action complaint filed in federal court in San Francisco.
Coinbase performed poorly in securing user accounts from illegal incursion and theft and did “an even poorer job” aiding clients whose accounts have been hacked. According to Aggarwal’s attorneys, instead of contacting him to a trustworthy customer service agent who might have assisted him, the company diverted him:
According to the lawsuit, in 49 minutes on April 24, hackers used 6,000 separate transactions to remove $190,000 from Aggarwal’s account. Aggarwal said that Coinbase had failed to reimburse his lost cryptocurrency. He intends to represent other Coinbase investors who have experienced losses comparable to his own.
This case is Aggarwal v. Coinbase Inc., 3:22-cv-04829, Northern District of California, United States District Court (San Francisco).
Coinbase Faces More Legal Pressure
Coinbase Faces More Legal Pressure. Image: Smith Collection/Gado
Another class action lawsuit was filed in the US District Court for the Northern District of Georgia, alleging that Coinbase failed to protect user accounts against hacking and theft and seeking more than $5 million in damages.
A putative class action suit was launched against the cryptocurrency exchange in August 2022, alleging that Coinbase failed to safeguard customer accounts, leaving them susceptible to theft and unlawful transactions. In addition, the complaint accuses Coinbase of financially injuring customers by shutting them out of their accounts permanently or for an extended period and of breaking federal law by listing securities on its trading platform.
In 2021, Coinbase was the first crypto exchange to go public in the US. It is currently facing various lawsuits from dissatisfied investors. Additionally, the firm faces a potential class action lawsuit filed in New Jersey alleging that the exchange allowed US residents to trade unregistered securities.
In August, a Coinbase shareholder accused the company of deceiving investors on a planned 2021 IPO. The platform is also seeking to arbitrate two other claims filed by investors. In this context, the Georgia action represents a class of over 100 people, including Georgia resident and lead plaintiff George Kattula, although his attorneys think there may be further victims.
The complaint cites a 2019 instance in which the exchange reportedly waited more than six months to allow a user back into their account, a practice the lawsuit alleges the company repeated.
According to the complaint, consumers must first contact Coinbase’s support team; if the issue cannot be handled this way, clients must next go through the “Formal Complaint Process”.
After the SEC announced in July 2022 that it was investigating Coinbase crypto exchange for the alleged sale of crypto securities, these lawsuits began to pile up in 2022.
The lawsuit asserts that Coinbase’s failure to design and maintain adequate cybersecurity safeguards caused investors to lose access to their accounts and wallets, investments and assets in the funds.
Kattula’s lawsuit seeks damages over $5 million (minus his attorney’s fees and costs), injunctive relief, and a binding judgement consisting of an order prohibiting the defendants from engaging in specific acts.
Thefts Are Rising
Even though the popularity of bitcoin, Solana, and ether has skyrocketed in recent years, the crypto market in the US remains primarily uncontrolled. It has also been often targeted by thieves.
In June, hackers stole about $100 million in crypto from a blockchain bridge operated by Harmony, adding to the over $1 billion in cryptocurrency already stolen in 2022. In August, a theft targeting blockchain bridge Nomad seized $200 million in cryptocurrency.
In this scenario, Celsius Network filed for bankruptcy in July 2022 after a purported $120 million attack in December. A Coinbase spokeswoman claimed that extensive procedures are taken to safeguard the security of consumer accounts at all times. According to Joe McGill, a cybersecurity expert who manages Chainabuses, the example appears to underscore the need for cryptocurrency exchanges to educate their customers on securing their accounts.
In recent years, cryptocurrency exchanges have strengthened their security networks, according to McGill. Still, it remains unclear if the Coinbase case will significantly impact other crypto users, traders, and investors who want their stolen monies restored.
