Coinbase Settlement: A $100 Million Compliance Failure
Understanding Coinbase’s $100 Million Regulatory Settlement
Silver Miller, a leader in cryptocurrency litigation, provides legal representation to individuals impacted by cryptocurrency exchange security and compliance failures. On January 2, 2023, Coinbase — one of the largest U.S.-based cryptocurrency exchanges — resolved a lawsuit brought against it by the New York State Department of Financial Services, agreeing in a Consent Order to pay $100 million to resolve what the NYDFS alleged were critical lapses in Coinbase’s anti-money laundering (AML) and Know Your Customer (KYC) protocols from as far back as 2018.
Exploring the Depth of Coinbase’s Compliance Issues
The Consent Order addressed what NYDFS officials asserted were severe shortcomings in Coinbase’s customer onboarding and transaction monitoring systems. Those deficiencies purportedly made Coinbase a hotbed for unauthorized activities and financial crimes, exposing users to potential hacks and the theft of crypto assets.
As New York DFS Superintendent Adrienne Harris stated at the time the settlement was announced:
“It is critical that all financial institutions safeguard their systems from bad actors, and the Department’s expectations with respect to consumer protection, cybersecurity, and anti-money laundering programs are just as stringent for cryptocurrency companies as they are for traditional financial services institutions,” said Superintendent Harris.
“Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth. That failure exposed the Coinbase platform to potential criminal activity requiring the Department to take immediate action including the installation of an Independent Monitor,” she added.
Upon reviewing the Consent Order, Interpath Advisory partner Federica Taccogna added:
“The shortfalls are so clearly outlined that it could be used as a laundry list of things to get in order by other firms. Those failings are incredibly widespread.”
Impact of the Consent Order on Coinbase’s Operations
Investigations by the NYDFS have repeatedly highlighted the agency’s concerns with Coinbase’s KYC and Customer Due Diligence (CDD) processes. Properly implemented, these controls are essential for identifying suspicious activities and are standard practice across financial institutions to safeguard against illegal operations.
What Coinbase Users Need to Know About the Settlement
The issues identified by the NYDFS allegedly led to over 100,000 unreviewed alerts at Coinbase related to suspicious activities, which significantly compromised user security. According to the Consent Order, the issues identified would require Coinbase to better manage and safeguard user transactions effectively as a means of reducing risk of substantial financial losses for Coinbase users in the future.
Legal Options for Coinbase Users with Hacked Accounts
Users whose Coinbase accounts were compromised for reasons related to those addressed in the Consent Order might have grounds for individual claims against Coinbase, depending upon a variety of factual and legal factors.
How Silver Miller Can Help Victims of Asset Loss at Coinbase
Silver Miller stands ready to assist those affected by issues such as those addressed in the NYDFS-Coinbase Consent Order, with experience in handling the complexities of arbitration claims related to cryptocurrency fraud. If you’ve suffered substantial financial losses at Coinbase, contact Silver Miller to review your case and discuss your legal options for recovery.
