AT&T hit with $224M lawsuit over cryptocurrency loss

AT&T hit with $224M lawsuit over cryptocurrency loss
© Getty Images

Cryptocurrency investor Michael Terpin on Wednesday filed a $224 million lawsuit against AT&T, accusing the telecommunications company of gross negligence, fraud and other violations after millions in online currency were allegedly stolen from his account.

Terpin alleges that the company failed to protect its customers' private information and has willfully turned a blind eye on corrupt transactions between AT&T employees and hackers, according to the complaint filed in U.S. District Court in Los Angeles.

The court documents claim the company’s employees “actively cooperate with hackers in SIM swap frauds by giving hackers direct access to customer.” 

ADVERTISEMENT

Terpin alleges that his digital coins were stolen in a SIM swap fraud. A SIM card, or subscriber identification module, helps authenticate an individual’s mobile phone. Fraud can occur when a provider is tricked into transferring a victim’s phone number to a SIM card that is run by a hacker, who can use access to the phone number to reset passwords and log in to the victim's online accounts.

In Terpin’s case, he claims an imposter pretended to be him in order to obtain his telephone number from “an insider cooperating with the hacker.”

The court documents allege that the information was easily obtained because the AT&T store employee did not require the imposter to provide proper verification about Terpin’s identity.

As a result, the hackers allegedly were able to access Terpin’s personal accounts in early January through AT&T — his service provider — and make off with almost $24 million in cryptocurrency coins.

Terpin says he was a prime target because of his "publicized involvement in cryptocurrency enterprises."

“What AT&T did was like 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,” the 65-page court document reads.

The company pushed back on Terpin’s claims, but did not offer further comment on the series of allegations Terpin makes in his complaint.

“We dispute these allegations and look forward to presenting our case in court,” an AT&T spokesperson said in a statement.

The complaint seeks to paint a picture of corruption and negligence on behalf of the prominent telecommunications company, which he alleges has “become too big to care.”

In the court documents, Terpin accuses the company of doing “nothing” to protect nearly 140 million customers from fraudulent activity, while pointing to a history of AT&T abusing customers’ private information.

This failure, Terpin alleges, makes AT&T “directly culpable for these attacks,” particularly because the company details a subscriber privacy protection system that he claims is “a lot of reassuring words that promote a false sense of security.”

“AT&T persists in not providing adequate security even though it knows that hackers target its systems because the hackers know they are riddled with flaws,” the court document reads.

Terpin also alleges the company’s efforts to buy Time Warner for $85 billion indicate the company is willing to spend in order to acquire, but not “pay for a state-of-the art security system and hire, train, and supervise competent and ethical employees.”

Terpin is seeking the $24 million lost in the theft as compensatory damages as well as $200 million for punitive damages, which he says will serve as a lesson for the company to start taking security seriously.

Terpin has been involved in the blockchain and cryptocurrency community for several years, in addition to running a public relations firm in the cryptocurrency sector.

He has started some cryptocurrency companies including Bit Angels, the first angel group focused on investing in bitcoin companies.