An Indiana surgeon is taking embattled cryptocurrency exchange Coinbase to court in San Francisco after losing more than $340,000 in digital currency in a hack.
A lawsuit filed last week in San Francisco Superior Court says that hackers broke into vascular surgeon Ricardo Vasquez’s Coinbase wallet and transferred $348,407 worth of various cryptocurrencies to accounts not related to him—fronting $40,000 of their own money to do so.
The suit notes that Coinbase advertises its “‘bank-level security’ standards”—among them password-reset delays and device verification to make sure that unfamiliar devices can’t instantaneously enter users’ accounts. Vasquez also set up two-factor authentication, a common safety precaution for online banking and financial services.
Despite such guardrails, Vasquez said in May 2022 hackers were allegedly able to connect his account to a device 600 miles away, set up a new phone number on the account and remove his two-factor authentication, the lawsuit states.
But hackers encountered a snag while breaking into Vasquez’s account: He owed $40,000 to Coinbase, a sum he was required to pay to make transfers. The hackers, per the suit, were undettered, paying off their victim's loan to gain access to his digital wallet.
Afterward, the hackers converted Vasquez’s holdings into the popular cryptocurrency Ether and—over the course of 217 transactions—plundered his wallet for the staggering sum.
Vasquez says that Coinbase’s customer service was of no use, allegedly failing to notify him in a reasonable time frame about any of these red-flag actions—a standard practice for banks and other digital institutions handling money. Despite multiple attempts to reach the company, he said he was met with automated voice messages and Coinbase representatives hanging up on him, ultimately taking weeks to be able to explain his case.
Vasquez is looking to receive the sum he lost in the hack, as well as interest and costs related to the lawsuit.
This lawsuit is the latest in a string of flare-ups between Coinbase and disgruntled customers. A proposed class action suit filed against Coinbase last year rose all the way to the Supreme Court, where it was halted by the judicial body in June while the company appeals customer lawsuits; meanwhile, the Supreme Court in November agreed to hear a separate arbitration dispute. In March, a New York man who lost 90% of his life savings—around $96,000—sued Coinbase after the company claimed no culpability following a similar hack. A New York woman sued Coinbase in October under similar circumstances. (The company insists in its terms of service that it “does not cover any losses resulting from unauthorized access.”)
There’s also the broader question of the crypto market’s long-term viability amid regulatory crackdowns and concerns about its volatility following what industry insiders describe as a “crypto winter” in 2022. Coinbase is still in the throes of a legal battle with the U.S. Securities and Exchange Commission, which has sought to regulate the industry following the high-profile breakdown of FTX.
Newton Oldfather, a San Anselmo-based attorney representing Vasquez, declined to comment. Neither Coinbase's nor Vasquez’s office responded to a request for comment.
Last week, a day before the lawsuit was filed, Coinbase introduced a new internal risk-scoring system to reduce the likelihood of fraudulent transactions.