Man who had ‘life savings’ of $96,000 stolen from his Coinbase wallet sues crypto exchange after he fell victim to sim-swap scam where fraudsters gained access to all of his accounts
- Investor is suing ‘unethical’ crypto firm Coinbase for its lax security measures
- Jared Ferguson claims company should have done more to stop fraudsters stealing his life savings
- Ferguson was targeted by an increasingly common ‘sim swap’ scam
An investor who lost $96,000 after being targeted by a cruel ‘sim swap’ scam is suing the cryptocurrency firm where his money was stored.
Jared Ferguson said the loss amounted to around ’90 percent’ of his life savings as he hit out at ‘immoral’ and ‘unethical’ firm Coinbase.
Ferguson alleges the crypto exchange’s security measures are too lax, as scammers were able to authorize the high-figure transaction out of his account.
He is seeking damages totaling at least triple what he lost, according to the lawsuit filed to the US District Court for the Northern District of California on Monday.
Coinbase is being sued by an investor who lost $96,000 to scammers. Pictured: Coinbase CEO Brian Armstrong in May 2022
The lawsuit alleges that Coinbase’s security measures are too weak to the point of not being ‘commercially reasonable’
Ferguson, who hails from New York, received a notification from his cell carrier T-Mobile claiming he had requested a new Sim card.
He contacted the firm to alert them to the fact he had not authorized the request, at which point representatives told him he would need to replace his sim.
After doing so he restored his iPhone to find thieves had stolen $96,000 from his Coinbase wallet.
The sophisticated scam sees criminals impersonate their victim, telling their cell carrier they have lost their sim card and need another urgently.
The new card then gives them access the victim’s calls and texts, letting them bypass two-factor authentication protections for banking apps.
And by the time the mobile carrier has alerted the victim to the fact a new sim has been ordered in their name, scammers have had enough time to gain full access to their financial accounts.
After contacting Coinbase, Ferguson was told he was ‘solely responsible’ for the security of his passcodes and devices.
But in his complaint, he accuses Coinbase’s security measures of being so weak they are not ‘commercially reasonable.’
He also slammed the firm as ‘immoral, unethical, oppressive, unscrupulous, unconscionable, substantially injurious to the general public, and offensive to public policy.’
It comes as cases of sim swapping scams soar globally.
In 2021 several well-known US musicians, sports stars and influencers were targeted by hackers who compromised their sim cards.
Their identities were kept anonymous but lawmakers noted many of them were famous.
The latest lawsuit comes as the crypto industry is already fighting to repair its reputation after the arrest of FTX founder Sam Bankman-Fried
Eight British men were arrested over the series of crimes.
And in 2019 Boston resident Joel Ortiz, 21, was jailed for targeting 13 victims in a sim swap scam.
It was believed to be the first-ever US arrest and conviction for the crime.
Coinbase was founded by the so-called ‘King of Crypto’ Brian Armstrong.
Its offices were previously in San Francisco but staff now permanently work from home.
On his Twitter bio, Armstrong claims he is ‘creating more economic freedom in the world.’
The latest lawsuit comes as Coinbase is already facing pressure from the Better Business Bureau for providing poor customer service to hacking victims.
Its legal policy says it ‘does not cover any losses resulting from unauthorized access to your personal Coinbase of Coinbase Pro accounts.’
And the firm is also suffering under the beleaguered reputation of the cryptocurrency industry, which reached crisis point in November 2021 when FTX boss Sam Bankman-Fried was arrested for allegedly siphoning billions in client funds.
Bankman-Fried is accused of using the money to prop up his hedge fund Alameda Research, buy lavish property in the Bahamas and splash out huge political donations.
How does SIM swapping work?
A sim swap scam – also known as sim hijacking – occurs when scammers take advantage of a weakness in your digital security involving your phone.
Many people use a two-factor authentication and verification step to protect their online accounts that requires a text message (SMS) or call to your mobile phone number to confirm a transaction.
Fraudsters who want to get into your account may try to do this by stealing your number, which is attached to you subscriber identity module (SIM) card.
To do this they gather as much personal information on you as they can get and engaging in ‘social engineering’.
Then, impersonating you, they call your mobile carrier claiming to have lost or damaged their (your) SIM card. They then ask customer service to activate a new SIM card in their possession, or they may claim they want to switch to another device.
After gaining control over your phone number, fraudsters can then access your communications with banks and other organizations — in particular, your text messages.
This means they will receive any codes or password resets sent to that phone for your accounts.
From this they can do a lot of damage such as copying across contacts, hacking into social media profiles and moving your money to other bank accounts.