Coinbase’s Risk Model Exposes Users Amid Data Breach and Lawsuits

Coinbase, the largest U.S.-based cryptocurrency exchange by trading volume, has long been viewed as a secure and trusted gateway for digital assets. Positioned as a blue-chip exchange distinct from offshore rivals, its reputation is now under scrutiny following lawsuits tied to a major insider data breach. The controversy reveals a financial structure that places minimal liability on the institution while pushing most of the risk onto users.

Unlike traditional banks, which are required to reimburse customers in cases of fraud or theft and operate under strict consumer protection regulations, Coinbase functions under an inverted model. It complies with surveillance obligations, such as reporting to the IRS and performing anti-money laundering (AML) checks, but does not guarantee safeguards comparable to banks. This structure has drawn criticism from consumer advocates who argue it systematically transfers risk from the institution to individual users.

The issue escalated in May 2025 when Coinbase disclosed that insiders at a third-party contractor, TaskUs, leaked sensitive customer data. Nearly 70,000 users saw their Social Security numbers, IDs, and bank details stolen. While Coinbase emphasized that no wallets were compromised, stolen personal data can still fuel long-term identity theft and financial fraud. Court documents allege the conspiracy began as early as September 2024, with TaskUs employee Ashita Mishra selling user data to criminal actors.

Beyond security failures, lawsuits accuse Coinbase of structural negligence. Despite marketing itself as the “safest” option in crypto, its user agreements limit liability to about $100 or fees paid in the past year—a negligible amount if substantial funds are stolen. Arbitration clauses also restrict collective legal action, often forcing victims to bear their own losses.

As the only publicly traded U.S. crypto exchange, with custody of over $400 billion in assets, Coinbase’s model sets a dangerous precedent. If normalized, it could reshape the future of finance into a system where surveillance is mandatory but consumer protection is optional—leaving users vulnerable in a supposedly “secure” ecosystem.