The importance of identity authentication with Coinbase leaks -the answer to ARGOS

One of the world's largest cryptocurrency exchanges, Coinbase, recently suffered a data breach that compromised user information. While strong authentication systems are the foundation of crypto asset protection, many companies continue to face challenges that go beyond simple hacking. Today, we would like to present the Coinbase breach case and ARGOS's proposed solution.

Coinbase Data Breach Case

Email Spam & Phishing Scams

Cryptocurrency investors have reported receiving scam emails impersonating Coinbase. These emails urged users to transfer their assets to fraudulent self-custody wallets before an April 1st deadline.

Victims shared recent phishing examples on X (formerly Twitter).

As shown in the image, users received mass phishing emails and texts. One was a fake verification text with a fake support number, while the other prompted users to set up a real wallet that scammers could drain.

Once assets were sent to a compromised wallet via SMS or email phishing, scammers gained instant access and stole the funds.

The scam email stated: "Coinbase operates as a registered broker and allows purchases, but all assets must be moved to Coinbase Wallet."

Coinbase officially responded to these phishing attempts on X, stating that they were aware of such emails and warning users: "We will never send you your recovery phrase. Never enter a recovery phrase provided by someone else."

Large-Scale Data Breach

Coinbase confirmed that at least 69,000 customers were affected. In documents submitted to the Maine Attorney General, Coinbase disclosed that 69,461 users' personal and financial information was stolen over several months.

The breach dated back to December 26, 2024, and persisted into early 2025. The hackers demanded a $20 million ransom, which Coinbase refused to pay.

The attackers bribed Coinbase's customer support staff to gain internal access and targeted wealthy clients, stealing names, email addresses, postal addresses, phone numbers, government-issued IDs, account balances, and transaction histories.

Limitations of Traditional Security Measures

Bypassing KYC with Generative AI

Ilya Kolosenko, CEO of cybersecurity firm ImmuniWeb, stated: "Anyone can create fake U.S. passports or Ivy League diplomas. About 50% of companies with KYC procedures can be bypassed using generative AI."

In February 2024, reports showed that AI-generated fake passports could bypass KYC checks at crypto exchanges. By October, AI video generators emerged as tools for defeating video-based KYC.

Kolosenko emphasized that this incident was not caused by system vulnerabilities but by insider bribery. While KYC remains a regulatory necessity, its limitations are becoming more apparent.

As insider threats and sophisticated forgery techniques grow, traditional document-based identity verification is proving insufficient. There's an urgent need for more robust, multi-layered security protocols.

The Risk of PIN Exposure

PINs (Personal Identification Numbers) are a common knowledge-based authentication method that relies on what the user knows. However, if that knowledge is leaked, anyone can gain access.

PINs can be exposed via:

• Shoulder surfing (watching someone input their PIN)

• Device hacking (screen readers, keyloggers)

• Reuse across multiple services

Most PINs are 4 to 6 digits, making them highly susceptible to brute-force attacks, which can guess them in seconds.

OTP Vulnerabilities: From SIM Swapping to Phishing

While OTPs (One-Time Passwords) enhance security, they are not foolproof:

• SMS-based OTPs can be intercepted via SIM swapping, where the attacker transfers the victim's number to a new SIM.

• Authenticator apps (e.g., Google Authenticator) are useless if the device is stolen.

• OTPs are also vulnerable to Man-in-the-Middle (MITM) attacks, where users input OTPs into phishing sites, which relay them to the real service in real time.

• Time-based OTPs (TOTP) can be predicted if attackers synchronize with the server's clock.

Ultimately, both PINs and OTPs rely on device control and user behavior, which are often the weakest links.

ARGOS's ID check: A Secure Alternative

Live Face-Based Identity Verification

What makes ARGOS different?

A secure authentication flow begins with a trustworthy onboarding process. Users first verify their identity via ARGOS's ID check, which uses globally recognized electronic document verification and eKYC methods.

For sensitive actions like transfers or account changes, ARGOS adds Face Auth a biometric layer that captures the user's live face and compares it to the enrolled data. This real-time process ensures that authentication is tied to the actual user, not a device or session.

Why does biometric authentication matter?

PINs and 2FA codes can be compromised via device hijacking or session takeovers. In contrast, Face Auth leverages a user's unique facial biometrics, making MITM attacks and credential reuse nearly impossible. It is also resistant to deepfakes or spoofed images.

Through these added layers, ARGOS provides an authentication environment that balances security with usability.

PIN / 2FA CODE vs. Face Auth: A Comparison

ARGOS’s Identity Verification & Liveness Detection

ARGOS’s ID check goes beyond facial recognition. It incorporates liveness detection to ensure the individual is physically present, preventing spoofing with photos or videos.

By anchoring a user's account to a verified identity and validating it again at critical actions, ARGOS builds trust throughout the user journey.

This incident illustrates how insider corruption and AI-powered spoofing can bypass traditional KYC. Document-based KYC is no longer sufficient for protecting user identities.

ARGOS is committed to solving these issues with ID check – a robust and reliable identity verification system.

In the era of digital transactions and increasing cyber threats, a secure identity system is no longer optional it’s essential.