Top US-based crypto exchange Coinbase has reached a settlement with regulators after bad actors stole $150 million using the platform.
According to a memo from New York’s Department of Financial Services, Coinbase must pay $50 million in fines to the regulator, plus invest an additional $50 million in bolstering its internal compliance programs over the next two years.
The memo says that Coinbase does the “bare minimum” to verify its customers and stifle illicit activities, which ultimately lead to a $150 million heist that occurred in mid-2021.
The regulator says that an individual was able to take advantage of Coinbase’s loose security.
“In the spring of 2021, an individual purporting to be an employee of a corporation (“Corporation A”) was able to open an account on behalf of Corporation A without authorization from that corporation, and without the appropriate personal identification documentation required by Coinbase policy.
As part of a sophisticated fraud, the individual was able to submit an online request form to raise the daily withdrawal limit by 50 times, which was granted despite a total lack of account activity and, therefore, no evidence that the existing thresholds were insufficient for the customer’s activity.
Then, on a single day, the employee transferred more than $150 million from Corporation A’s bank account (that the employee had also gained unauthorized access to) into Corporation A’s Coinbase account. The employee then immediately converted the fiat funds into virtual currency, then immediately moved the virtual currency to a wallet off the Coinbase platform.”
Last month, Coinbase CEO Brian Armstrong laid out what he called a “realistic blueprint” for how the crypto industry could evolve. Armstrong said crypto firms should undergo “rigorous” annual audits, establish controls and board governance, meet basic cybersecurity standards and possess blacklist capability for sanctions.
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