Coinbase Faced a Turbulent Day as Its Stock Dropped 7.2% Following Two Major Announcements, a Sophisticated Data Breach and a Reemerging SEC Investigation

Coinbase faced a turbulent day as its stock dropped 7.2% following two major announcements, a sophisticated data breach and a reemerging SEC investigation.

Coinbase (NASDAQ:COIN) faced a turbulent day as its stock slid 7.2% following two major announcements: a sophisticated data breach and a reemerging SEC investigation.

While this double blow triggered alarm among investors, top analysts argue that the market’s response may be too harsh.

According to Barclays and Oppenheimer, the Coinbase stock drop doesn’t accurately reflect the isolated nature of the events.

Barclays called the reaction “overblown,” highlighting that the breach did not stem from system flaws or blockchain vulnerabilities. Instead, human factors were at play, specifically, a case of customer support agents being bribed to leak user information.

What Really Happened in the Coinbase Data Breach?

The recent data breach at Coinbase was not your typical cyber breach. The hackers didn’t compromise systems or exploit a vulnerability, but instead, went with social engineering. The scammers bribed customer service representatives overseas to give them user details of customers that consisted of names, addresses and masked Social Security numbers. With the leaked information in hand, they were able to trick Users to which they intended to sending crypto assets to scammers.

Although less than 1% of transacting users were impacted by the breach, Coinbase did not pay the $20 million ransom by the hackers, as per the last publicised communications. Instead, the affected users will be fully reimbursed by Coinbase and have reported working with law enforcement to identify the perpetrators.

Even though this was not a good a breach, it’s not good, as there was no compromise to any passwords, private keys, or funds in the Coinbase accounts, which, analysts maintain, makes it reputation over the breach being systemic, and in addition, Coinbase’s reasonable responsiveness limited unnecessarily further degradation of the breach.

Is the SEC Probe a Major Concern?

The second blow came in the form of a Coinbase SEC probe, which unfolded amid heightened scrutiny over a metric used in the company’s 2021 IPO: the “100 million verified users” figure.

According to Coinbase’s legal team, this investigation has been ongoing since the Biden administration and is not connected to any current disclosures or performance issues.

Paul Grewal, Coinbase’s Chief Legal Officer, stated that the company stopped reporting this metric more than two years ago and that the investigation should not be dragging on.

Analysts from Benchmark and other firms largely agree that the probe is more of a distraction than a major setback for Coinbase.

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