Phantom Wallet Legal Tussle: A $500k Wiener Doge Theft Case
Cryptocurrency wallet provider, Phantom, faces a lawsuit totaling $3.1 million due to alleged security loopholes resulting in a crypto theft of $500,000.
Here's a breakdown of the unfolding legal drama surrounding Phantom Technologies and the alleged theft of over half a million dollars worth of Wiener Doge tokens:
The Scandal Explodes
In a lawsuit filed by Murphy’s Law - a celebrated crypto law firm - Thomas Liam Murphy and 13 other plaintiffs allege Phantom's security vulnerabilities led to the theft of their Wiener Doge tokens. They are seeking $3.1 million in damages for alleged violations, including operating as an unregistered trading platform.
browser Memory Woes
The cybercriminal, according to court documents obtained by Decrypt, hacked into Liam's personal computer and exported his Phantom wallet private keys from the browser's working memory. This gave the attacker access to Liam's three Phantom wallets, compromising the funds within.
The Heart of the Matter
Phantom, valued over $3 billion and popular among Solana blockchain users, reportedly stores private keys in unencrypted browser memory. The plaintiffs argue this makes the Phantom wallet vulnerable to malware attacks.
Firm Denies Wrongdoing
Phantom denies the allegations, insisting that the claims are "entirely without merit." Despite the lawsuit, Phantom has maintained that they cannot prevent crypto scams from malicious links and emphasize their work with law enforcement agencies in combating criminal activities.
Questionable Partnerships
The lawsuit also points to Phantom’s partnership with OKX, a cryptocurrency exchange implicated in federal money laundering charges. The suit alleges that OKX's integration with Phantom enabled the unauthorized liquidation of the plaintiffs' assets.
Troubling Security Concerns
Other allegations against Phantom include a lack of basic security measures such as velocity checks, geolocation anomalies, and withdrawal limits, lack of user warnings about known cybersecurity risks, and aiding money laundering through its OKX partnership.
The Ultimate Impact
The hack and subsequent token liquidation destroyed the Wiener Doge project, which peaked at a market capitalization of $3.1 million. The 13 additional plaintiffs, friends, and family of Liam, joined the lawsuit after losing investments in the meme coin.
Enrichment Insights
- Unencrypted Storage: Phantom stores users' private keys unencrypted, making them susceptible to malware extraction.
- Lack of Basic Security Measures: Phantom allegedly lacks essential security checks, such as velocity checks, geolocation anomalies, and withdrawal limits.
- Inadequate User Protection: Phantom did not warn users of known cybersecurity risks, despite being aware of them.
- Cybercriminal Activity: The stolen Wiener Doge tokens were converted into Solana using Phantom’s built-in Swapper feature, resulting in a minimal return.
- Partnership with OKX: Phantom’s integration with OKX, which has been implicated in federal money laundering charges, is questioned in the lawsuit.
The outcome of this legal battle will likely set a precedent in the realm of decentralized finance and creator responsibility, shedding light on the necessity for stronger security measures and user protections in the ever-evolving crypto landscape.
- The lawsuit filed by Murphy's Law against Phantom Technologies accuses the unregistered trading platform of storing users' private keys unencrypted, a potential vulnerability that led to the theft of Wiener Doge tokens.
- In the Phantom Wallet case, the attacker reportedly hacked into Thomas Liam Murphy's computer and extracted his Phantom wallet private keys from the browser's working memory, compromising the funds within.
- The plaintiffs in the Phantom Wallet case argue that Phantom's decision to store private keys in plain sight in the browser memory makes the wallet vulnerable to malware attacks, threatening the security of users' investments.
- Apart from the unencrypted storage issue, the lawsuit also points to Phantom’s partnership with OKX, a cryptocurrency exchange implicated in federal money laundering charges, as a source of concern.
- The outcome of the Phantom Wallet legal tussle is anticipated to establish a significant precedent in the decentralized finance sector, emphasizing the importance of stronger security measures, user protections, and responsible behavior from crypto creators in the fast-paced tech and finance landscape.
