Coinbase Employees Bribed By Hackers

Mixed News For Coinbase

Last week’s positive news that Coinbase would be listed on the S&P 500 was tarnished by the announcement that hackers had obtained Coinbase customer details.

Coinbase’s stock price was up 24% on Tuesday, following the S&P 500 announcement. Ironically, it will replace Discover Financial, which many consider a bastion of traditional finance.

On Thursday, Coinbase confirmed that employees had been targeted and bribed to give the hackers customers’ data.

The potential financial toll of the hack, including the subsequent phishing attacks, is estimated to be $400 million, which doesn’t include the cost to Coinbase’s credibility.

Coinbase Investigation

Coinbase CEO, Brian Armstrong, confirmed that Coinbase had received a ransom note demanding $20 million in Bitcoin in exchange for the hackers not releasing the customer data.

After investigation, Armstrong indicated that the hackers had approached overseas customer support agents and had successfully bribed several agents to release customer data.

While support agents don’t have access to passwords, private keys or customer funds, they can access personal data, including email, date of birth, address and photos of Government ID used to verify their identity.

That has allowed the hackers to conduct social engineering attacks in an attempt to persuade customers to send funds to the hackers.

Armstrong estimates that less than 1% of monthly transaction users were affected and that customers impacted by the data release have been notified.

Database Vulnerability

While concerning, the announcement of a data breach at Coinbase was not a total surprise.

It’s an example of where Know Your Customer (KYC) requirements create worse problems than they solve.

Any database that stores valuable information about any meaningful number of customers is a target, and Coinbase and other high-profile custodians and data storage companies are vulnerable.

The inclusion of Coinbase in the S&P 500 recognises institutional and retail acceptance of the asset class. The breach, however, does not help adoption in the wider community.