Did You Lose Money with Coinbase? You May Be Able to Recover Your Losses
Cryptocurrency investors who suffered losses through Coinbase should understand the platform’s troublesome regulatory history. In 2023, the New York State Department of Financial Services alleged that the company failed to maintain an anti-money laundering compliance program. The agency said the program did not keep pace with its growth.
Those allegations centered on Coinbase KYC requirements, AML controls, transaction monitoring, suspicious activity reports, and enhanced due diligence backlogs. These issues matter because weak compliance systems can expose users to fraudsters, suspicious transactions, and preventable account risk.
This article focuses on compliance failures, the Bank Secrecy Act, and the 2023 NYDFS consent order. Investors looking for a broader overview of hacked accounts, data breaches, and lawsuits involving the platform can read our related article on recent Coinbase lawsuits and crypto losses.
Investors who suffered coinbase losses, a possible coinbase scam, or other crypto losses after suspicious transfers or account misuse should ask Kurta Law to review whether compliance failures contributed to their damages.
Alleged Failure to Comply with Bank Secrecy Act Requirements
The Bank Secrecy Act of 1970 created rules to identify transactions that may hide money from criminal activity. The Bank Secrecy Act and its Anti-Money Laundering (AML) rules require financial institutions to collect information about their users. These records help firms detect suspicious activity.
These rules include the “Know Your Customer” rule. That rule requires financial institutions to verify customers’ identities. The exchange allegedly failed to comply with these anti-money laundering rules, leaving its customers vulnerable to fraud.
Coinbase KYC failures may matter when a loss involves fake accounts, suspicious users, or transactions that should have received closer review.
What is the Platform?
Coinbase serves a similar function to the stock exchange. It 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. As a result, they are generally not subject to securities regulations.
Regulators have determined that many other cryptocurrencies and crypto tokens function as investments. Therefore, they may be subject to the SEC’s regulatory oversight. In 2025, the SEC created the Crypto Task Force. The task force seeks to clarify how federal securities laws apply to the crypto space. The SEC dismissed an enforcement action against Coinbase pending the results of the Crypto Task Force’s findings.
Because digital assets occupy a shifting regulatory space, crypto losses require careful review. The legal path may depend on whether the loss involved market movement, platform conduct, or a financial professional’s recommendation.
NYDFS Consent Order: $100 Million in Penalties and Compliance Investment
In January 2023, the New York State Department of Financial Services (DFS) issued a Consent Order against Coinbase. DFS fined the company $50 million. It also ordered the trading platform to pay another $50 million to enhance its anti-money laundering compliance program.
The DFS also installed an independent monitor. The monitor was tasked with working with the exchange and determining steps needed to improve its anti-money laundering compliance.
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 the New York DFS Investigation
The DFS investigation allegedly uncovered the following shortcomings:
- The company allegedly filed Suspicious Activity Reports (SARs) months after the Transaction Monitoring System first detected suspicious transactions.
- Financial institutions must verify their customers’ identities. However, 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 its Transaction Monitoring System generated alerts to potentially suspicious transactions. However, the company allegedly failed to review over 100,000 reports.
- The Consent Order states that the company had a backlog of 14,000 individuals requiring enhanced due diligence. These individuals had been identified as high-risk for engaging in fraud. The exchange should have subjected these customers to heightened scrutiny. That review would have helped confirm whether they provided accurate information about themselves and their transactions.
In a recent blog post, the company argued that laws should be changed to accommodate the exchange’s failure to comply with anti-fraud regulations. The blog, “The Bank Secrecy Act is Broken. Technology Can Fix It,” argues that “Know Your Customer” (KYC) identification requirements are too stringent. The company also argues that these rules require companies to collect personal data that may be unnecessary.
Why KYC and AML Controls Matter to Investors
Coinbase KYC procedures are central to this issue. Know Your Customer(KYC) rules require financial institutions to verify customer identities and conduct due diligence. That review helps detect suspicious activity before fraud spreads through the platform. KYC and AML controls help identify users, monitor transactions, and detect suspicious activity. When those systems fail, fraudsters may open accounts, move funds, or target customers more easily.
Investors who lost money due to suspicious transactions, account misuse, fraud-related transfers, or a coinbase scam should ask Kurta Law to review whether compliance failures contributed to their losses.
Is the Exchange 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.
Insider Trading Ruling
Ishan Wahi, a former product manager at the company, pled guilty in 2023 to insider trading. Prosecutors said he used confidential information about which crypto assets were scheduled to appear on the exchange. 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.
This ruling is separate from the NYDFS consent order. However, it still matters to investors. The platform handles customer data, digital assets, and market-moving information. Weak internal controls can create serious concerns.
Poor Security Causes Significant Losses
The company has also faced security concerns involving customer information and account access. In May 2025, hackers breached customer account data. The hackers allegedly used the stolen information to trick 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 the company did not pay. The exchange instead created a $20 million reward for information leading to arrests.
The company previously disclosed another account-access issue in a Coinbase Notice from September 2021. According to the notice, at least 6,000 customers had funds removed from their accounts. The notice stated that the losses were due in part to “a flaw in Coinbase’s Account Recovery process.”
The hackers obtained certain users’ “full name, email address, home address, date of birth, IP addresses for account activity, transaction history, account holdings, and balance.”
These security issues are summarized here because they relate to the platform’s broader compliance history. Investors who want a more detailed review of hacked accounts, unauthorized transfers, and data breach lawsuits should read Kurta Law’s related guide to recent Coinbase lawsuits and crypto losses.
Scam Warning Signs and Investor Risk
A coinbase scam may involve fake support contacts, phishing emails, suspicious wallet transfers, or fraudsters who use the platform to move stolen funds. These issues are different from normal market volatility.
Kurta Law reviews Coinbase losses tied to scams, account misuse, unauthorized transfers, and broker-recommended crypto exposure. These records can help determine whether the loss came from fraud, platform conduct, or market movement.
Kurta Crypto Fraud Attorneys Can Help You Fight Back
Based on these alleged compliance failures and security concerns, we have reason to believe the platform has not always adequately protected its users’ funds. If you lost money after suspicious transactions, account misuse, fraud-related transfers, or broker-recommended crypto exposure, you may have a case for a securities attorney.
Kurta Law reviews crypto losses involving suspicious transactions, compliance failures, account misuse, broker misconduct, and Coinbase losses tied to weak controls or unsuitable recommendations.
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, email info@kurtalawfirm.com, or contact Kurta Security Fraud Attorneys online.