$50 000 USD

JULY 2021

UNITED STATES

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."

 

"On November 8, 2021, Adam Alfia (“Plaintiff”), individually and on behalf of others similarly situated, represented by Evan Matthew Selik of McCathern LLP, filed a class action lawsuit against Coinbase Global, Inc. and DOES 1 through 50 (collectively, “Defendants”), seeking damages along with prejudgment and post judgement interests among other relief for the alleged breach of contract that caused a lot of worry and stress to Plaintiff. This case was filed in the United States District Court in the Northern District of California with Judge Alex G. Tse presiding.

 

In the complaint, Plaintiff alleged that, “Coinbase stated in 2012 and is an online platform that allows consumers all over the world the ability to able to securely send and receive Bitcoin. Currently, Coinbase has expanded its platform for accessing the broader cryptoeconomy, including Ethereum. On April 15, 2021, Coinbase went public” and “Mr. Alfia used Coinbase as a way to buy, sell and manage his cryptocurrency. He commonly traded Bitcoin, Ethereum and Dogecoin through Coinbase.”

 

Plaintiff further alleged that, “On July 19, 2021, Mr. Alfia logged into his Coinbase account to find that a purchase of $50,000 of Ethereum had occurred. Mr. Alfia did not make this purchase or consent to have any other person or entity make this purchase” and “Thereafter, on the same day, Mr. Alfia logged into his Bank of America banking account to investigate if the $50,000 used to purchase Ethereum had actually been deducted from his Bank of America banking account. He saw that it had. This caused Mr. Alfia great stress and worry.”

 

Plaintiff also alleged that, “At all relevant times, Coinbase had a duty to Plaintiff and the putative class wherein it would properly secure their private information and cryptocurrency from unauthorized transactions and dissemination” and “Coinbase failed to properly secure Plaintiff and the putative class’s private information and cryptocurrency from unauthorized transactions and dissemination” and “As a result of Defendant’s conduct as alleged herein, Defendant breached its duty to Plaintiff and the putative class, thus causing significant damage, worry and stress.”

 

"There are four claims of relief laid down by Plaintiff. The first claim is for the alleged breach of contract. The second claim is for alleged negligence. The third claim is for alleged fraud. The fourth claim is for alleged negligent misrepresentation."

 

"In the prayer for relief, Plaintiff requested the court to certify this action as a class action. Further, Plaintiff requested the court for a judgment against Defendant along with punitive damages for committing fraud along with prejudgment and post-judgment interest, attorneys’ fees, and cost of suit along with any such other relief the court deems just."

The plaintiff reports that there was an unauthorized withdrawal from his bank account through the Coinbase platform. It's unclear if the ethereum was withdrawn from his account. The issue was not resolved through Coinbase, and as of November 2021 is being brought before the courts.

HOW COULD THIS HAVE BEEN PREVENTED?

The fundamental issue is most likely due to unauthorized access to the account. Coinbase failed to properly authenticate the plaintiff. Without specific details on this case, it's hard to know what happened. In general, authentication should be multi-factor and require further factors for specific account actions such as withdrawals or trading.

 

Check Our Framework For Safe Secure Exchange Platforms

Sources And Further Reading

 For questions or enquiries, email info@quadrigainitiative.com.

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