Between March and May 20, the hacker or hackers used a flaw in Coinbase’s account recovery process to get the SMS two-factor authentication token to break into customers’ accounts and transfer funds out of them.
 

The bad actor or actors also had access to the email address, password, and phone number associated with each Coinbase account. Coinbase believes that the hacker stole those credentials through a phishing scheme and noted in its letter to the California AG that it has not found evidence of the hacker getting this information from Coinbase itself.
 

“We took immediate action to mitigate the impact of the campaign by working with external partners to remove phishing sites as they were identified, as well as notifying the email providers impacted,” a Coinbase spokesperson said via email. “Unfortunately we believe, although cannot conclusively determine, that some Coinbase customers may have fallen victim to the phishing campaign and turned over their Coinbase credentials and the phone numbers verified in their accounts to attackers.”
 

Coinbase said it is compensating customers for the stolen funds, but it’s unclear whether those payments are being made in fiat or crypto.
 

The exchange recommended that users switch to a more secure version of multi-factor authentication such as a hardware security key or an authentication app.
 

This appears to be one of the largest breaches to have affected Coinbase. Other notable breaches included a password glitch in August 2019 that stored 3,500 customer passwords in plain text on an internal server log, although outside parties didn’t take advantage of the vulnerability. In the same month, Coinbase revealed the details of a sophisticated attack that was blocked by Coinbase but that resembled what would normally happen in a nation-state-sponsored attack.

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