Hacking Coinbase: The Great Bitcoin Bank Robbery
In March, he sold all his stocks, including Apple and Amazon, and used a chunk of the proceeds to buy Bitcoin and Ethereum on a site called Coinbase. The decision made Everett, the CEO of artificial intelligence startup Prome, almost instantly richer, as the blockchain-based currencies’ value rocketed up exponentially over the next several weeks. But then, while he was out walking the dog after 10 p.m. on Wednesday, May 17, Everett got the call. It was T-Mobile, ringing him to confirm that it was switching his phone number to a different device.
It was a suspicious move that Everett had most certainly not requested. But even as he pleaded with the agent to block the switch, it was too late. Less than five minutes later, Everett’s cell service abruptly shut off, and as he rushed to his computer, he saw himself being robbed in real time. A raft of email notifications confirmed that someone had taken control of his main Gmail account, then broken into his Coinbase “wallet.” They’d gotten in with the help of his switched-over phone number: Everett’s account required him to log in with a two-factor authentication code sent by text message, as a second safeguard—and now the text had gone straight to the thief.
Popularizer: Brian Armstrong founded Coinbase to make cryptocurrency accessible to the masses; he calls the online exchange “Gmail for digital currency.”
Photograph by Winni Wintermeyer for Fortune
But hackers have never breached Coinbase’s own virtual fortress, and that impenetrability has earned it a reputation as the safest place to buy Bitcoin, helping it attract more than 9 million customers who store at least $3 billion in cryptocurrency there, and who have traded $25 billion to date on its retail brokerage as well as its institutional exchange, GDAX. The five-year-old Coinbase just raised $100 million in new funding, valuing the company at $1.6 billion—making it the blockchain industry’s first “unicorn.” “If you look at what they are world-class at, it’s security, trust, safety … all these things that, frankly, banks are good at,” Fred Wilson, the venture capitalist and one of Coinbase’s earliest and largest backers, said at a conference in March. “They’re like JPMorgan or Goldman Sachs for blockchain.”