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Coinbase's stock (COIN) fell by more than 8% Thursday after the US cryptocurrency exchange disclosed that cyber attackers had stolen sensitive customer data and threatened to publish it unless the company paid a $20 million ransom.
Coinbase said no passwords or private crypto wallet codes had been compromised and that the data leak impacts less than 1% of Coinbase's monthly transacting customers, according to a blog post.
Instead of paying the ransom, Coinbase is establishing a $20 million reward or bounty program for information leading to the arrest and conviction of the attackers. It also said it's planning to reimburse customers affected by the incident.
"No, we're not going to pay your ransom," Coinbase CEO Brian Armstrong said in a video published Thursday morning on X addressing the breach.
"These attackers had been approaching our overseas customer support agents, looking for a weak link, someone to accept a bribe in exchange for sharing some customer information," Armstrong said.
A preliminary estimate of the cost for the incident is "approximately $180 million to $400 million," Coinbase said in a Thursday SEC filing. A spokesperson clarified that the cost is "mostly" for the bounty program and reimbursing affected customers.
The attackers gained control of customer information, including names, emails, physical addresses, phone numbers, and government identification details — including the last four digits of their Social Security numbers — along with some bank account identifiers and snapshots of customer balance data and transaction history.
None of Coinbase's institutional "Prime" customers were directly impacted. Neither was access to customer or company crypto wallets.
The incident is an unexpected security setback for Coinbase, which has recently been notching some wins as the crypto world finally gets some of the credibility it has been seeking for years.
Last week, the company announced a $2.9 billion acquisition of crypto options exchange Deribit. Earlier this week, Coinbase's stock soared after it was officially added to the S&P 500 index (^GSPC).
"Coinbase joining the S&P 500 means crypto's here to stay," Armstrong said in a Yahoo Finance interview on Capitol Hill Wednesday.
"It's going to be in everybody's 401(k). Everyone's going to have crypto exposure at least indirectly through Coinbase. And it's also a symbol that crypto is updating the financial system," Armstrong added.
