Did You Lose Money with Coinbase?

Cryptocurrency investors who suffered losses on Coinbase should be aware that they may have lost money due to the trading platform’s failure to comply with regulatory requirements. These failures suggest that Coinbase is not sufficiently dedicated to protecting its users from fraudsters. Investors who lost money due to these failings may be able to recover losses and should consider speaking with a New York Securities Attorney.

Coinbase Allegedly Failed to Comply with Bank Secrecy Act

The Bank Secrecy Act of 1970 implemented rules designed to catch transactions that could hide money generated by criminal activity. The Bank Secrecy Act and its Anti-Money Laundering (AML) rules require financial institutions to collect information about their users in order to detect suspicious activity. These rules include the “Know Your Customer” rule, which requires financial institutions to verify customers’ identities. Coinbase allegedly failed to comply with these anti-money laundering rules, leaving its customers vulnerable to fraud.

What is Coinbase?

Coinbase serves a similar function to the stock exchange and provides a platform for buying and selling cryptocurrencies.

Cryptocurrency exists in a regulatory grey area. Certain cryptocurrencies, like Bitcoin and Ethereum, have established themselves as currencies and are therefore not subject to securities regulations. Regulators have determined that many other cryptocurrencies and crypto tokens function as investments and are therefore subject to the SEC’s regulatory oversight. In 2025, the SEC created the Crypto Task Force, which seeks to clarify the application of federal securities laws to the crypto space. The SEC dismissed an enforcement action against Coinbase pending the results of the Crypto Task Force’s findings.

New York Orders Coinbase to Pay $100 Million

In January 2023, the New York State Department of Financial Services (DFS) issued a Consent Order fining Coinbase $50 million and ordered the trading platform to pay another $50 million to enhance its anti-money laundering compliance program. The DFS also installed an independent monitor to work with Coinbase and determine steps needed to enhance their compliance with anti-money laundering rules. DFS Superintendent Adrienne Harris said in an official statement, “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.” 

Results of New York DFS Investigation into Coinbase

The DFS investigation into Coinbase allegedly uncovered the following shortcomings:

• Coinbase allegedly filed Suspicious Activity Reports (SARs) months after the Transaction Monitoring System initially detected suspicious transactions.
• Financial institutions are supposed to verify their customers’ identities, but DFS alleged that “Coinbase treated customer onboarding requirements as a simple check-the-box exercise and failed to conduct appropriate due diligence.”
• DFS also alleged that Coinbase’s Transaction Monitoring System generated alerts to potentially suspicious transactions, but that Coinbase failed to review over 100,000 reports.
• The Consent Order states that there was a backlog of 14,000 individuals requiring enhanced due diligence, meaning they had been identified as high-risk for engaging in fraud. These customers should have been subject to heightened scrutiny to ensure they had provided accurate information about themselves and their transactions.

In a recent blog post, Coinbase posited that laws should change to accommodate the exchange’s failure to comply with anti-fraud regulations. The blog entitled “The Bank Secrecy Act is Broken. Technology Can Fix It” argues that the identification requirements imposed by the “Know Your Customer” law are too stringent and require the collection of personal data, data that Coinbase wishes its readers to believe is unnecessary.  This blog suggests that Coinbase wishes to simply change the rules instead of complying with existing regulations.

Is Coinbase Safe?

Coinbase has faced a variety of legal challenges since its founding in 2012. Investors should keep the following security breaches in mind when using the platform.

Coinbase Insider Trading

Ishan Wahi, a former product manager at Coinbase, pled guilty in 2023 to insider trading using confidential information about which crypto assets were scheduled to appear on Coinbase exchanges. He allegedly tipped off associates so they could place trades based on non-public information. This was the first-ever insider trading case involving the crypto markets.

Hackers Steal Customer Information from Coinbase

In May 2025, hackers breached the account data of Coinbase customers. The hackers allegedly used the stolen information to trick Coinbase customers into sending funds. Hackers reportedly bribed support staff working overseas to hand over private customer information. Reuters reported that the SEC had already begun investigating whether Coinbase had failed to comply with regulations. The hackers demanded a $20 million ransom, which Coinbase did not pay. It instead created a $20 million reward for information leading to arrests.

Breach of Coinbase’s Two-Factor Authentication

According to a Coinbase Notice from September 2021, at least 6,000 Coinbase customers had funds removed from their accounts by hackers due in part to “a flaw in Coinbase’s Account Recovery process.” The hackers were able to obtain certain Coinbase users’ “full name, email address, home address, date of birth, IP addresses for account activity, transaction history, account holdings, and balance.”

Kurta Law Can Help You Recover

Based on these alleged security breaches, we have reason to believe Coinbase is not adequately protecting its users’ funds. If you lost money with Coinbase, you may have a case for a securities attorney. Contact a New York securities attorney today for a free case evaluation – our attorneys do not collect a fee unless you recover money. Call 877 600-0098 or email info@kurtalawfirm.com.