Coinbase Under Federal Investigation After Massive Data Breach

Just days after securing its place in the S&P 500, Coinbase is now under federal investigation following a major security breach that exposed the personal data of several high-profile users.

The U.S. Department of Justice has reportedly launched a probe into the cyberattack, with officials from its criminal division now actively examining the events leading up to the incident.

The attack, believed to have involved insider corruption, allegedly included overseas agents who were bribed to leak access to Coinbase’s internal systems. While the exchange claims no sensitive financial data was compromised, affected users — including prominent investor Roelof Botha of Sequoia Capital — tell a different story.

In response, Coinbase has pledged to reimburse impacted customers and is offering a $20 million reward for information leading to the perpetrators. The hackers are said to have demanded the same amount in return for withholding stolen data, intensifying concerns around blackmail and insider vulnerability in the crypto industry.

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The breach hasn’t gone unnoticed across the sector. Reports suggest that Binance and Kraken have also faced similar attacks recently. Some crypto millionaires have even taken the step of hiring private security amid fears that personal data from exchanges may be circulating among malicious actors. Coinbase is now staring down multiple lawsuits over the leak.

Despite the turmoil, Coinbase made history by becoming the first crypto-native company listed on the S&P 500, replacing Discover Financial Services after its merger with Capital One. But the celebration was short-lived — the company’s stock closed the day lower, slipping back after a short-lived recovery from its post-breach crash.

Coinbase’s Chief Legal Officer, Paul Grewal, confirmed that the company is working with both domestic and international law enforcement agencies, including the DOJ. At the same time, Coinbase continues to cooperate with the SEC, which is separately investigating the firm over alleged misrepresentations of user metrics.

As legal challenges mount on multiple fronts, Coinbase’s historic S&P 500 debut now stands in stark contrast to the storm it must weather in the weeks ahead.

Alexander Stefanov