COINBASE

DESCRIPTION OF EVENTS

"Coinbase is a secure platform that makes it easy to buy, sell, and store cryptocurrency like Bitcoin, Ethereum, and more." "As the leading mainstream cryptocurrency exchange in the United States, Coinbase has become a standard on-ramp for new crypto investors. Coinbase offers a wide variety of products including cryptocurrency investing, an advanced trading platform, custodial accounts for institutions, a wallet for retail investors, and its own U.S. dollar stable-coin."

"Coinbase was founded in 2012 and is a fully regulated and licensed cryptocurrency exchange supporting all U.S. states except Hawaii. Coinbase initially only allowed for Bitcoin trading but quickly began adding cryptocurrencies that fit its decentralized criteria." "Its list expanded to include Ethereum, Litecoin, Bitcoin Cash, XRP, and many others with the promise of more as long as its requirements are met."

Joe "Blumetti invested proceeds from the sale of his family’s beverage distribution business into cryptocurrency."

"Dimitrelos says thieves used a hacked username and password from a security breach to enter Blumetti’s email account and identify him as a crypto trader."

“They knew he had the account. They knew what the username was. They were able to log in, but they still needed that challenge token, in this case, the PIN,” Dimitrelos said.

"So they set up a fake website that looked like it was from Coinbase and contacted him."

“What they told Joe was 'Hey, we saw you had an error in a transaction you had about a month ago' and they used that knowledge because they were in his email,” Dimitrelos said.

“The gentleman reached out to me through text and he called. And he sent me a screen that showed the Coinbase sign-in,” Blumetti said.

"That’s what tricked him into sending him his verification code."

“When I finally opened my computer and used my two-factor on my computer, all I saw was my account draining from its top-level, straight down,” Blumetti said.

"The first transaction transferred more than $500,000 worth of Bitcoin out of his account."

“I’m still not back in my account, so I cannot tell how bad the damage is, but it’s in the hundreds of thousands,” he said.

“This is by far not only the most unsuspected thing that’s ever happened to me that I didn’t see coming, but the worst,” Blumetti said.

"Over the past month, Joe says he sent Coinbase multiple emails trying to get help and received only generic responses." "Blumetti received messages from Coinbase saying the company wasn’t responsible for their losses."

“You steal someone’s gold and diamonds and if it’s found, they go to jail and you go home with your stuff. Why is it that Cryptocurrency, today’s number one growing asset, can be stolen, found and cannot be recouped?” Blumetti said.

"Coinbase acknowledges that these are terrible crimes that can have a significant impact on consumers. With more and more of our personal information available online, it is increasingly important for consumers to understand how to protect their personal email accounts and cell phones from unauthorized third parties. Once a third party gains access to a consumer’s email or phone, that consumer’s other online accounts may also be at risk. That is why Coinbase regularly works to educate our customers about how to protect their personal email accounts and phones -- it is the most important thing they can do to prevent unauthorized access to all of their online accounts, not just Coinbase. Coinbase takes extensive security measures to ensure our customer accounts remain as safe as possible. Our customers have never lost funds due to a security breach of our platform. In addition to educating our customers on best practices for securing their Coinbase accounts, Coinbase has a dedicated fraud investigations team and policy to ensure specialized support for our customers. The team is responsible for providing a coordinated approach to the identification, investigation, and resolution of fraudulent activities on the Coinbase platform. Because of these steps, unauthorized access to a Coinbase account remains extremely rare. When Ms. Vidovic and Mr. Blumetti emailed our support team to report possible unauthorized activity in their accounts, in both instances Coinbase responded within minutes and immediately locked their accounts to prevent any further unauthorized activity. Coinbase also offered step-by-step directions to both Ms. Vidovic and Mr. Blumetti to reconfirm identities and further secure their accounts. We are still in contact with both Ms. Vidovic and Mr. Blumetti at this time. Coinbase thoroughly investigates all incidents of unauthorized access to a Coinbase account, including Ms. Vidovic’s and Mr. Blumetti’s accounts."

Coinbase is the largest exchange platform in the United States. Cryptocurrency investor Joe Blumetti had invested proceeds from his family's beverage distribution business. After gaining access to his email account, the attacker was able to trick Joe into logging in and providing the two-factor authentication code using a phishing website and sending him a specifically targeted email about a transaction. After Joe completed the login, the hacker used the authentication to trigger withdrawals, rapidly emptying the account.

HOW COULD THIS HAVE BEEN PREVENTED?

It's recommended that platforms use factors that involve physical hardware, and more factors are always better to authenticate users.

Another strategy is to prevent withdrawals from accounts within a longer time period whenever a password is changed or there's a login from a suspicious location.

All of these methods can effectively reduce the ability to perform these types of attacks. The responsibility and incentive are shared between platform and user to prevent these situations.

Check Our Framework For Safe Secure Exchange Platforms

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