According to a March 7 Bloomberg article, Coinbase declined to take responsibility for a hacking victim or issue a reimbursement. The firm gave its response in a court filing on March 6 in response to an account holder who lost $96,000 last year.
The firm emailed the victim, Jared Ferguson of New York, and claimed it was his fault rather than theirs:
“Please note you are solely responsible for the security of your e-mail, your passwords, your 2FA codes, and your devices,”
Ferguson filed a lawsuit against Coinbase in May 2022, citing losses brought on by a security vulnerability. He said that Coinbase’s email explicitly denied any liability for the hacking of its users’ accounts.
The victim claims he never requested a SIM card swap but nevertheless received an SMS from his mobile provider mentioning it. The next day, when his device’s service was restored, he found that his Coinbase account had been empty. Also, it held practically all of his savings.
Ferguson asserts that Coinbase is accountable for unlawful withdrawals under state and federal law. However, America’s multi-billion dollar cryptocurrency exchange disagrees.
The lawsuit claims that Coinbase’s security system failed to identify and hold “clearly fraudulent and unlawful transactions,” which is the case’s key argument.
In less than eight hours, he claims, a new gadget drained the account. Additionally, this happened right away after his password was changed from an IP address that had never before been connected to his account.
A SIM switch assault cost another victim in 2021 $7,200 from a Coinbase account. Once more, the business declined to cover the losses. Although the firm is the market leader in the US, it has frequently come under fire for its poor customer service.
Coinbase CEO reveals that the new layer-2 network may have AML controls
In related news, Coinbase CEO Brian Armstrong made a suggestion that the company’s upcoming layer-2 blockchain network Base might be launched with transaction monitoring and anti-money laundering controls.
Armstrong stated that Base currently has some centralized components in an interview with Joe Weisenthal on Bloomberg Radio on March 6, but he also said that “it will be more and more decentralized over time.”
However, he went on to say that users of the new layer-2 network will be subject to transaction monitoring and AML rules.
He went on to say that Coinbase will have responsibility for transaction monitoring. Adding,
“I think that the centralized actors are the ones that are probably going to have the most responsibility to avoid money laundering issues and having transaction monitoring programs and things like that.”
Chris Blec, a proponent of decentralization, brought attention to Armstrong’s remarks in a March 7 tweet.
According to Coinbase, Base is an Ethereum layer-2 network that provides customers with a safe, affordable, and developer-friendly means to create decentralized apps.
It is being created using Optimism’s “OP Stack,” which will allow for quick transactions on Ethereum. Base entered the testnet phase on February 23 after its unveiling. Although Coinbase hasn’t yet announced a mainnet launch date, it is anticipated to occur in Q2, 2023.
In a blog post published in late February, five days after the company revealed Base, Blec issued a warning on Coinbase’s most recent layer-2 offering.
Because of the employment of “sequencers,” which are “nodes that generate and execute L2 blocks while relaying users’ activities from L2 to L1,” he said that layer-2 infrastructure was extremely centralized.
The single sequencer for Base will be run by Coinbase, a licensed money transmitter. This raised the issue of whether Base will become the first-ever L2 to impose Know Your Customer (KYC) rules formally.
Coinbase hasn’t confirmed or denied whether Base would be implementing KYC and AML measures