‘Pig Butchering’ Scam Victim Files Lawsuit Against Coinbase Over Allegedly Inadequate Anti-Fraud Measures

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A proposed class action lawsuit alleges that Coinbase’s lackluster fraud prevention measures have exposed users to cryptocurrency investment scams.

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The 32-page lawsuit was filed by a California man who claims Coinbase failed to protect him from a “pig butchering” scam carried out on its crypto platform that caused him to lose roughly $110,000. According to the complaint, Coinbase could have prevented this and many other instances of fraud had the defendant complied with its legal obligations to verify customers’ identities and monitor suspicious activity.

A pig butchering scam begins with a fraudster reaching out to their victim online, often through dating apps, messaging platforms or social media, the filing says. After gaining the victim’s trust, a scammer will encourage them to participate in a crypto investment opportunity with the promises of extravagant returns before eventually stealing their funds, the case explains.

The plaintiff says that in August 2022, he connected with a woman who went by “Snow” on the LINE messaging app. Per the complaint, Snow persuaded him to invest more than $4,800 in a fake crypto-mining operation called Tetherpool using Coinbase Wallet. She then convinced the plaintiff to invest increasingly larger amounts until his earnings grew to nearly $500,000, the suit says. However, when the man attempted to withdraw his funds, Tetherpool froze his account and demanded an “immediate and substantial” tax, the Coinbase lawsuit shares.

The lawsuit argues the plaintiff’s experience contradicts Coinbase’s representations that it is a “trusted” and “secure” platform operating in compliance with state and federal regulations designed to prevent financial fraud.

Indeed, in 2023, Coinbase was ordered by the New York State Department of Financial Services (NYDFS) to pay a $100 million settlement after an investigation into the defendant’s anti-fraud procedures found “significant failures” that violated state law and made the Coinbase platform “vulnerable to serious criminal conduct,” an NYDFS press release reads.

“These failures are not accidental,” the case alleges, claiming that Coinbase’s lax customer verification and fraud prevention measures allow it to process more transactions and collect more transaction fees—its primary source of revenue.

The filing also accuses Coinbase of failing to fulfill contractual promises to reverse transactions it suspects of fraud and provide customers with an adequate support system to report illicit activity. The plaintiff claims the defendant’s AI virtual assistant failed to offer any substantive help, and its “overwhelmed and under responsive” representatives told him the company was unable to assist him in resolving the issue or recovering his stolen money.

The lawsuit looks to represent all United States residents who, during the applicable statute of limitations period, bought or transferred cryptocurrency on the Coinbase platform or the Coinbase Wallet website or application.

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