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Cryptocurrency exchange flips the script on scammers, turning an extortion attempt into a reward for anyone with information regarding the identity of the cyber-criminals.
On May 11, Coinbase – the largest cryptocurrency exchange in the United States – received an alarming email.
Unknown cyber-criminals had paid several overseas-based insiders to share the personal data of Coinbase customers, and were now attempting to extort Coinbase out of US$20 million to keep the data private.
The data included names and addresses, scans of government-issued IDs, crypto-account data, and limited details of customers’ bank details and social security numbers.
According to Coinbase, the criminals intended to conduct a scam campaign against these customers, tricking them out of their crypto by pretending to be representatives of Coinbase in addition to the threat to publish the data and extort the company.
However, rather than pay the US$20 million ransom, Coinbase instead offered the same sum as a reward for anyone who could come forward with information related to the data theft.
“Crypto adoption depends on trust. To the customers affected, we’re sorry for the worry and inconvenience this incident caused,” Coinbase said in a May 15 blog post.
“We’ll keep owning issues when they arise and investing in world‑class defences – because that’s how we protect our customers and keep the crypto economy safe for everyone.”
Coinbase believes less than one per cent of its customer base was included in the data theft
In addition to the reward, Coinbase has said it will reimburse any customers who lost money to the scammers and enact additional customer safeguards on accounts. Coinbase will also invest in insider-threat detection and remain transparent about its efforts to harden the company’s defences.
The crypto addresses of the criminals have been tagged so the activity can be tracked and assets recovered, while the insiders involved in the scheme – a mix of employees and contractors – have been fired and referred to law enforcement.
“We will press criminal charges,” Coinbase said.
However, the company has warned its customers to “Expect imposters” and suggested strong 2FA, such as hardware keys, be employed at all times, and anyone asking for passwords or 2FA codes be hung up on immediately.
In a Form 8-K filing to the US Securities and Exchange Commission, Coinbase said it expects the incident to cost the company “approximately (US)$180 million to (US)$400 million relating to remediation costs and voluntary customer reimbursements”.
“The Company plans to aggressively pursue all remedies. As the Company’s investigation is ongoing, the full impact of these events are not yet known.”
David Hollingworth has been writing about technology for over 20 years, and has worked for a range of print and online titles in his career. He is enjoying getting to grips with cyber security, especially when it lets him talk about Lego.
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