Two major wireless carriers, AT&T and T-Mobile were sued last week for failing to protect customer data and cryptocurrency accounts. The suit was brought by Silver Miller Law, a firm that has become a major player in the cryptocurrency arena after securing several million-dollar judgments on behalf of digital asset investors. The complaint alleges that both AT&T and T-Mobile “possessed flaws in their security systems” that combined with improperly trained employees allowed hackers to gain access to customer smartphones through “SIM swapping.”
SIM swapping is an identity-theft technique in which hackers first gather crucial data such as a customer’s financial information, phone password, and answers to security questions. The data is then used to prove identity when hackers contact cell phone providers and pretend that their phone’s SIM card has been lost or damaged. As a result, hackers are able to transfer phone numbers to SIM cards in their possession, which provides them with “a very valuable method of hijacking other digital accounts” belonging to that phone number.
…even less sophisticated hackers have been able to take advantage of the security weaknesses of cell phone service providers to drain individual cryptocurrency accounts.
As a result of SIM swapping schemes, hackers have been able to gain access to and subsequently drain the cryptocurrency accounts of AT&T and T-Mobile customers. One AT&T customer represented by Silver Miller Law was assured that the provider had “beefed up” security after an unsuccessful hacking attempt on his account; however, a subsequent SIM swapping hack caused him to lose $621,000 in cryptocurrency.
The Terpin complaint further alleged that AT&T’s actions were analogous to “a hotel giving a thief with a fake ID a room key and a key to the room safe to steal jewelry in the safe from the rightful owner.”
Terpin co-founded BitAngels, “an angel group for bitcoin investors,” in 2013 as well as a digital currency fund called BitAngels/Dapps Fund. As a result, Terpin has been the target of multiple cell phone hacks aimed at his cryptocurrency assets, including two in a seven-month period. Terpin is seeking $24 million in compensatory damages and an additional $200 million in punitive damages in his lawsuit against AT&T.
Cryptocurrencies have gained immense popularity among investors over the past few years. The most prominent cryptocurrency, Bitcoin, has been particularly lucrative for early investors. Bitcoin peaked in value in December 2017 when it neared $20,000. However, it has since dropped significantly, with some data indicating a 65 percent loss in value during 2018. At least some of the decrease in value can be attributed to “sell-offs across cryptocurrency markets” prompted by numerous hacks on cryptocurrency exchanges. The Wall Street Journal reported in July of this year that “recent cyberattacks have hurt market sentiment.”
In September, Michael Novogratz, a former hedge fund manager and “one of the most outspoken advocates of cryptocurrencies on Wall Street,” declared that Bitcoin had hit its rock bottom value at around $6,419.03 and was due for a rebound. So far, no such upswing has occurred. Bitcoin value has held steady around $6,000 for months now. However, several experts agree that this price stability will not last and that the last few months have been the “calm before the storm.” Additionally, some have predicted that the cryptocurrency market will “explode” in 2019.
Whether or not bitcoin will experience a resurgence in value is yet to be seen. However, 2018 has definitively shown that vulnerability to hacking is the major flaw of the overall cryptocurrency market. Investors have shown hesitation and worry over “fraud and lax regulation of the industry” in the wake of repeated cyberattacks on cryptocurrency exchanges. However, even less sophisticated hackers have been able to take advantage of the security weaknesses of cell phone service providers to drain individual cryptocurrency accounts. Until security is improved at both levels, investment in cryptocurrencies may not be worth the potential reward.
Sam Taylor, 12 November 2018