Coinbase Advanced Market Vulnerability

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Coinbase

Coinbase had a critical bug in their centralized trading platform, which would have allowed hackers to swap assets for one another arbitrarily in making trades. For example, a user could trade BTC to USD, but actually offer up only an equivalent amount of Shiba Inu token. No funds were lost as the issue was reported by a white hacker to CoinBase, in exchange for a $250k bounty.

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

About Coinbase

"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."

"Recently a hacker known as “Tree of Alpha” won a Coinbase bounty for finding and reporting a bug that could have severely harmed Coinbase."

"Anyone here can get me a direct line with someone at @coinbase, preferably management or dev team, possibly @brian_armstrong himself?"

"I'm submitting a hacker1 report but I'm afraid this can't wait. Can't say more either, this is potentially market-nuking."

"On February 11, 2022, we received a report from a third-party researcher indicating that they had uncovered a flaw in Coinbase’s trading interface. We promptly mobilized our security incident response team to identify and patch the bug, and resolved the underlying system issue without any impact to customer funds."

"Tree of Alpha stated that it was tinkering with the new advanced Coinbase trading platform to understand how orders were sent and executed. He said he placed an order on the ETH/EUR pair and noticed that the API needed a product identification, source, and recipient account."

"At first, I decided to poke around the new Advanced Trading platform to find out how orders are sent and what a successful one looks like."

"I put an ETH-EUR order from the UI, and grabbed the request that was sent."

"I noticed the API needs product, source and target account ids."

"In order to get a failed message, I changed the product_id to BTC-USD, but did not change the two account ids (source is my ETH wallet, target is my EUR wallet)."

"Expecting an error because my account is not allowed to trade the BTC-USD pair, the order just … goes through."

"I just used 0.0243 ETH to sell 0.0243 BTC on the BTC-USD pair, a pair I do not have access to, without holding any BTC."

"Hoping this is a UI bug, I check the fills on the order, and they match the API: those trades really happened, on the live order book."

"[T]here aren't many things quite as sobering yet terrifying as realizing you just put a 50 BTC limit sell order using 50 SHIB and everyone else can see it. 5 minutes later, I was sending this initial tweet."

"The consequences would have been so worst and beyond imagination, if any black hat hacker had found the nug, but thanks to Tree of Alpha, he not only saved Coinbase but all the traders that are trusting Coinbase security and trading billions of dollars on it."

"Thanks to the researcher who responsibly disclosed this issue, Coinbase was able to fix this bug in a matter of hours, and conclusively determine that it has never been maliciously exploited. We have also implemented additional checks to ensure that it cannot happen again."

"Around 11 p.m. UTC (6 p.m. ET), Coinbase tweeted that it had “re-enabled full service for retail advanced trading.”"

"Coinbase strongly supports independent security research, and when those researchers uncover serious issues, we want to ensure that they are rewarded accordingly. As a result, we are paying our largest-ever bug bounty for this finding: $250,000."

"The hacker himself told the case on his Twitter account, where he talked about how he got the “biggest bug bounty in history.” Tree of Alpha received a total of $250K for identifying a fatal bug."

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Coinbase Advanced Market Vulnerability

Date	Event	Description
February 11th, 2022 11:16:00 AM MST	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Total Amount Lost

No funds were lost.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

A bounty of $250,000 USD was paid for the discovery.

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.