The founder of online news publication TechCrunch has claimed that Coinbase’s recent data breach “will lead to people dying,” amid a wave of kidnap attempts targeting high-net-worth crypto holders.
TechCrunch founder Michael Arrington added that this should be a point of reflection for regulators to re-think the importance of know-your-customer (KYC), a process that requires users to confirm their identity to a platform. He also called for prison time for executives that fail to “adequately protect” customer information.
“This hack—which includes home addresses and account balances—will lead to people dying. It probably has already,” he tweeted. “The human cost, denominated in misery, is much larger than the $400 million or so they think it will actually cost the company to reimburse people.”
On Thursday, Coinbase announced that cybercriminals tried to blackmail the exchange into paying $20 million in Bitcoin over the stolen customer data—which it refused to pay. Instead, the company put out a $20 million award for any information that would lead to the “arrest and conviction” of the attackers. The crypto exchange has also pledged to reimburse any customers that were tricked into sending funds to the attackers.
The U.S. Justice Department has since opened a probe into the data breach, Bloomberg later reported.
But for Arrington, who also founded venture capital firm CrunchFund and hedge fund Arrington Capital, this isn’t enough. He believes that people are in immediate physical danger following the breach, which exposed data including names, addresses, phone numbers, emails, government-ID images, and more.
Arrington said that he was a “long time” investor in Coinbase but did not respond to Decrypt’s request for comment in what capacity this investment was made. Coinbase also did not respond to Decrypt’s request for comment.
Crypto kidnap attempts
A number of high-profile kidnapping attempts has heightened concerns over the safety of crypto owners with significant holdings.
In January, Ledger co-founder David Balland was abducted from his home in France alongside his wife. The pair were held captive for roughly 24 hours, with the kidnappers “mutilating” Balland’s hand as part of their ransom demand, before local law enforcement recovered the executive and his wife.
In March, popular streamer and OnlyFans personality Kaitlyn “Amouranth” Siragusa was the victim of a home invasion by three armed attackers who physically assaulted her while ordering her to transfer her Bitcoin to them. She managed to fire her gun, causing the attackers to flee the scene.
In May, the father of a crypto millionaire was rescued by French authorities after being held hostage for days—but not without having his finger severed by the kidnappers. A week later there was an attempted but failed kidnapping of a woman and her child, relatives of a leading figure in France’s crypto industry.
As a result of these and other incidents, an Amsterdam-based physical security firm told Bloomberg that it had noticed an uptick in clients with large crypto holdings, prior to the Coinbase breach.
The risks of KYC data
Arrington believes that in the wake of these attacks, crypto companies that handle user data need to be much more careful than they currently are.
“Combining these KYC laws with corporate profit maximization and lax laws on penalties for hacks like these means these issues will continue to happen,” he tweeted. “Both governments and corporations need to step up to stop this. As I said, the cost can only be measured in human suffering.”
Former Coinbase chief technology officer Balaji Srinivasan pushed back on Arrington’s position that executives should be punished, arguing that regulators are forcing KYC onto unwilling companies.
“When enough people die, the laws may change,” Arrington hit back.
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