Key Points:
- Analysts from Barclays and Oppenheimer suggest that the recent sell-off of Coinbase shares might not truly reflect the isolated incident of a cyberattack.
- The cyber incident involved customer data leaks facilitated by bribed support agents; Coinbase has committed to compensations.
- The SEC’s investigation pertains to discrepancies in reported user numbers from 2021 and is not linked to current disclosures.
Coinbase (COIN) stock experienced a sharp decline of 7.2% on Thursday, triggered by the announcement of a social engineering-based data breach and the resurfacing of a Securities and Exchange Commission (SEC) probe into potential misstatements regarding user counts at the time of its initial public offering (IPO). The stock’s value briefly dipped by nearly 9% before a modest recovery.
Analysts opine that the market reaction seems exaggerated, given that the breach stemmed from compromised customer support representatives rather than flaws in the company’s core blockchain security. The attackers manipulated customer data using information obtained through bribery, including names and masked social security numbers, to coerce users into transferring cryptocurrency assets.
Coinbase refrained from meeting a ransom demand of $20 million and instead prioritized reimbursing affected clients while collaborating with law enforcement to resolve the issue. They reported that less than 1% of active users were impacted, and important credentials, such as passwords and private keys, were not compromised.
Oppenheimer reinforced Barclays’ viewpoint, noting the breach could damage Coinbase’s reputation but is likely an isolated incident, not indicative of larger systemic risks. Coinbase anticipates the financial repercussions could range between $180 million and $400 million covering losses and a new bounty program aimed at identifying the perpetrators.
As for the SEC inquiry concerning user metrics from 2021, Coinbase has not reported these figures in recent years. Investors fear that this investigation might lead to broader concerns, but many analysts deem it irrelevant to the company’s current performance. .
Mark Palmer from Benchmark likened the risk from the SEC’s scrutiny to mere “noise” and expressed ongoing optimism for Coinbase’s growth, adjusting his price target upwards to $301 from $252 as institutional adoption prospects improve.
In conclusion, this episode showcases the delicate balance between resilient technology and human error within the cryptocurrency realm, and while the fallout might be manageable, Coinbase’s approach will influence the lasting impact of this breach.
