Coinbase says scammers bribed insiders to steal customer data — and it could cost the crypto exchange $400 million

• Coinbase said it was targeted by scammers who bribed company staff,.
• The crypto exchange said the criminals are holding customer data for ransom.
• In a filing, the crypto exchange said the incident could cost it up to $400 million.

Coinbase said scammers bribed company insiders to steal sensitive data, and the hack could cost the cryptocurrency exchange as much as $400 million.

The firm said it was recently infiltrated by "criminals" who used cash rewards to get Coinbase customer support agents outside the US to send them customer data. The scammers intended to use the data to pose as Coinbase itself and trick users into sending over their crypto funds.

"Now, unfortunately, they were able to find a few bad apples," Coinbase CEO Brian Armstrong said in a video response posted on X.

The scammers tried to "extort" Coinbase by demanding $20 million in ransom for covering up the situation, the firm said in a statement on Thursday morning. Armstrong turned down the offer in the video.

The firm said in a filing that the incident could cost $180 million to $400 million. The figures were based on Coinbase's preliminary estimates of remediation costs, customer reimbursements, and other related expenses.

"To the customers affected, we're sorry for the worry and inconvenience this incident caused. We'll keep owning issues when they arise and investing in world-class defenses," the firm said in a statement.

Coinbase declined to provide additional comment and referred BI to its blog post.

The exchange said the breach affected less than 1% of users, who may have had their names, account data, the last four digits of their Social Security numbers, and other sensitive information exposed.

It said it would reimburse customers who had accidentally sent funds to scammers.

It's also implementing a $20 million reward fund for information that could help with the arrest of the scammers. Coinbase said it had already tagged the addresses of the scammers, and was working with authorities.

Coinbase fired the customer support agents who provided insider information to the group, and said it would press criminal charges against those individuals.

"For these would-be extortionists or anyone seeking to harm Coinbase customers, know that we will prosecute you and bring you to justice. And now you have my answer," Armstrong said in his video.

Crypto crime has skyrocketed in recent years. Losses stemming from crypto investment fraud ballooned to $3.96 billion in 2023, up 335% over a two-year period, according to data from the FBI.

Coinbase stock dropped 6% on Thursday following the incident, denting a recent rally spurred on by news that the company would become the first crypto firm to join the S&P 500.