Coinbase Hit with Legal Action Tied to Data Breach

Coinbase is once again in legal trouble following a recent security breach and fallout tied to a UK regulatory matter. A new lawsuit claims that the crypto exchange and two of its top executives failed to protect user data and did not properly inform investors about an agreement issue with the Financial Conduct Authority in the UK.

Good to know

• Coinbase is already facing at least six other lawsuits linked to the same breach.
• The company reported a $20 million extortion attempt tied to insider bribery.
• The estimated cost of damages could go as high as $400 million.

The most recent complaint was filed by Coinbase shareholder Brady Nessler on May 22 in federal court in Pennsylvania. According to the filing, Nessler argues that the company’s stock price dropped sharply due to the breach and the alleged agreement violation. He believes shareholders were hit with large financial losses as a result.

Coinbase revealed on May 15 that the breach happened after several of its customer service agents were bribed. The attackers managed to gain access to internal systems and steal some user data. The company also disclosed that a $20 million extortion attempt followed just four days earlier. It now estimates that overall damage costs could reach $400 million.

Although other lawsuits have been filed over the same incident, Nessler’s appears to be the first that directly connects investor losses to the company’s stock performance after the breach went public.

So far, at least six legal actions have been launched against Coinbase for allegedly mishandling the situation and failing to protect sensitive user data. Nessler’s complaint adds a new dimension by focusing on the impact on the company’s market value.

Coinbase has not yet issued a public comment on the investor-driven lawsuit, but the wave of legal challenges puts more pressure on the exchange at a time when regulatory and cybersecurity risks are rising across the crypto sector.