Coinbase Faces $180M-$400M Breach Costs

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Good Morning.

Coinbase suffered a security breach right after it entered the S&P 500. TLDR: the exchange will compensate affected customers, but most are worried that their net worth, name, and address are leaked. Sigh.

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In Today's Email:

• What Matters: Coinbase Faces $180-$400M Breach Costs 👾 

• Founders Highlight: Tomasz Stanczak of Lantern Capital 👨 

• Deal Flow: Robinhood Buys WonderFi for $179M 💰️ 

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WHAT MATTERS

Coinbase Faces $180M-$400M Breach Costs

State of play: Coinbase reported that cybercriminals bribed offshore customer support employees to access sensitive user data such as addresses, emails, government IDs, and account information.

• This breach potentially exposed customers to extensive social engineering attacks.

• Coinbase swiftly terminated the implicated staff, but hasn't disclosed precisely when the breach happened or the number of employees involved.

• The company estimates expenses between $180M and $400M for remediation and voluntary customer reimbursements.

• The remediation and reimbursement range could shift significantly upon further evaluation.

• Hackers initially demanded a $20M ransom, which Coinbase rejected, instead launching a $20M bounty program to identify the perpetrators.

What’s next: Regulators may scrutinize Coinbase's security protocols, possibly leading to stricter compliance requirements for the exchange and similar platforms in the future.

For builders and investors: Be careful friends.

BUILDER-INVESTOR HIGHLIGHT

Tomasz Stanczak of Lantern Capital

Intro: Tomasz Stanczak is the Founder of Lantern Capital, an early-stage venture capital firm focused on investing in high-potential early-stage projects in the Ethereum ecosystem and other multi-chain compatible projects.

• Tomasz is also the Co-Executive Director of the Ether Foundation, Founder of Nethermind and Oiler Protocol, and a member of the Board of Directors of StarkNet.

Previous background: Tomasz has extensive experience in financial software development, specializing in FX trading platforms at Citi, commodity trading at CME Group, underwriting systems at MunichRe, and ERP solutions at Comarch.

The big idea: Tomasz and Lantern Capital aim to accelerate communication between machines and the ledger.

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INSIGHTS

Sonic Labs Liquidates Multichain Foundation

State of play: Sonic Labs (formerly Fantom Foundation) secured approval from Singapore’s High Court to liquidate Multichain Foundation after a $210M hack in 2023.

• Sonic Labs suffered roughly one-third of the total losses from the exploit.

• The court appointed KPMG Singapore as joint liquidators.

• Sonic Labs initially pursued legal action due to Multichain’s lack of response and alleged fraudulent misrepresentations.

• CEO Michael Kong noted that liquidation became necessary after Multichain personnel remained unreachable.

• He expressed hope that recovered assets would eventually be returned to affected users.

DEAL FLOWS

Robinhood Buys WonderFi for $179M

Deal flows slowed down this week - we saw $240M in deals 💼 

Robinhood acquired Canadian crypto platform WonderFi Technologies, owner of Bitbuy and Coinsquare, for ~$179M.

• The move marks Robinhood's entry into Canada's crypto market.

• The deal is potentially adding up to $250M annually in revenue, representing about a 10% increase from its current levels.

• Analyst Dan Dolev noted this acquisition aligns with Robinhood's global expansion strategy, complementing recent moves into the European and Asian markets.

Deal flows in the past week:

• T-Rex, $17M Pre-Seed Round

• DoubleUp, $4M Seed Round

• Nirvana Labs, $6M Seed Round

• Turtle Club, $6.2M Seed Round

• KYD Labs, $7.1M Seed Round

• N1, $2M Public Token Sale

• Sonic, $10M Strategic Round

• Perpl, $9.25M Unknown Round

QUICK BITES

• Bitdeer’s Q1 mining revenue drops 41% YoY.

• Ethereum stablecoin volume hits record $908B.

• Lawmakers continue talks on Senate stablecoin bill.

• Polymarket's new market creation hits an all-time high in April.

• MetaMask co-founder Dan Finlay says the token is still a 'maybe.'

• Sonic Labs secures court order to liquidate Multichain Foundation.

• DOJ charges 12 with $263M crypto theft linked to Genesis creditor.

• FTX to begin $5B in creditor payouts May 30 under bankruptcy plan.

• Wintermute expands to NYC and taps policy veteran Ron Hammond.

• State of Wisconsin unloads over $300M worth of BlackRock's Bitcoin ETF.

• Coinbase estimates $180M to $400M in costs tied to customer data breach.

• US federal judge rejects the SEC and Ripple's request for an indicative ruling.

• SEC investigates whether Coinbase inflated user numbers ahead of 2021 IPO.

• BlackRock’s sBUIDL launches 'first direct DeFi protocol integration' with Euler.

NOTEWORTHY READS

• Nick Tong’s read on initial signs of life.

• 0xKyle’s read on the FRAX investment opportunity.

• CoinDesk’s read on Movement Labs’ secret advisory deals.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.