Law360 reports on a new lawsuit filed by Murphy’s Law founding partner Liam Murphy on behalf of Boston resident Joseph Arena, alleging that cryptocurrency platforms Coinbase and Kraken failed to adequately protect him from a sophisticated impersonation scam that led to the loss of $500,000. Reporter Julie Manganis covers the case, which was filed Tuesday in Suffolk County Superior Court in Massachusetts.
According to the complaint, Arena was contacted in November by someone claiming to be a representative of a cryptocurrency exchange where he had an account. When he attempted to verify the caller’s warning that his account had been compromised, he was unable to reach anyone at Kraken customer service despite multiple attempts. Faced with what appeared to be a time-sensitive security threat, Arena moved $301,081 in bitcoin and another $198,587 in USD Coin from his Kraken account to his Coinbase wallet. However, a compromised address had already been added to the Coinbase account, and within moments of the transfer, the entirety of his cryptocurrency was removed without authorization.
The complaint alleges the stolen assets were rapidly laundered through a network of cryptocurrency exchanges, instant swap services, and offshore platforms widely known within the industry to be used for criminal money laundering. Arena says his data had been accessed in a Coinbase data breach prior to the scam call and that the breach should have led the company to take action to lessen the risk of exploitation. He also alleges the scam caller knew about the data breach, suggesting he was specifically targeted rather than the victim of a random phishing attempt.
The complaint describes the case as being about foreseeable criminal activity, known laundering pathways, and platform design and operational failures that allowed a fraud to succeed at every critical juncture. In addition to Coinbase and Kraken parent company Payward Inc., the complaint names as defendants a number of overseas entities, including HoudiniSwap, CHN Group, EasyBit, FixedFloat, Mek Global Ltd., PhoenixFin Pte. Ltd., Flashdot Ltd., Peken Global Ltd., Bybit Technology Ltd., PackDraw Ltd., and Binance Holdings Ltd., along with a John Doe who oversaw the scheme.
Murphy told Law360 that the defendants have all been put on notice of the claims but have not offered to take any action to help his client, and that he is representing a number of other clients who have been victimized by crypto fraud.
If you have been the victim of a cryptocurrency impersonation scam or platform security failure, contact Murphy’s Law for a free consultation to discuss your legal options.