CryptoNinjas reports on the $3.1 million federal lawsuit filed against Phantom Technologies following a security breach that resulted in the theft of over $500,000 in digital assets and the near-total collapse of the Wiener Doge meme coin.
The complaint, filed April 14 in the Southern District of New York by Murphy’s Law founding partner Liam Murphy and 13 co-plaintiffs, accuses Phantom of storing users’ private keys in unencrypted browser memory, making them vulnerable to exploitation by malware and rogue browser extensions. A hacker extracted Murphy’s private key directly from active memory without needing to bypass multi-factor authentication, then drained three Phantom wallets of over $500,000 in Wiener Doge tokens.
Using Phantom’s built-in Swapper tool, the stolen assets were converted into Solana and sold off, causing a 99% drop in Wiener Doge’s value. According to the filing, Phantom executives were aware that private keys were stored in memory accessible to browser processes but made a calculated decision to remain silent.
The lawsuit further alleges that Phantom lacked basic safeguards typically found in other platforms, including velocity checks, withdrawal limits, and geolocation anomaly detection. Despite Murphy reporting the hack immediately, Phantom allegedly responded that it was a noncustodial wallet and placed full responsibility on the user.
The suit also names OKX as a co-defendant, noting that Phantom’s built-in Swapper function was not registered as a Swap Execution Facility with the CFTC and citing OKX’s guilty plea to money laundering-related charges. The plaintiffs assert that both Phantom and OKX functioned as unregistered trading platforms despite advertising their tools as safe and user-controlled.
The 14 plaintiffs are seeking $3.1 million in damages, equivalent to $3.10 per lost Wiener Doge token at its peak market price. The legal filing lists seven major claims against Phantom, including operating as an unregistered trading platform, negligence in security practices, fraudulent marketing of security features, and aiding and abetting money laundering through OKX.
Phantom has stated that it strongly denies any allegations of wrongdoing and looks forward to demonstrating that the claims are without merit.
If you believe you have been the victim of a crypto fraud or security breach, contact Murphy’s Law for a free consultation to discuss your legal options.