Like most people when they first invested in cryptocurrency, Shane Rochman thought bitcoin was the future. The world’s economies could collapse next week, he once declared, but his digital coin collection would emerge unscathed.
Unless, of course, it was stolen first.
Rochman’s saga began in 2018. The 33-year-old started a new business: a series of food tours of Toronto led by stand-up comics (including himself). He had recently married and his wife was pregnant with their first son, Avery.
Rocheman had to plan ahead. He wanted a house and a college fund for his son. He opened a few savings accounts and invested about $12,000 in a diverse portfolio of stocks and bonds.
But his collage of sideshows didn’t quite pay the bills, and Rochman often found himself drawing money from his savings. Then a friend told him about cryptocurrency – “the next big thing.”
Rochman opened an account with Coinbase, a Silicon Valley operation that allows members to buy and sell cryptocurrencies, and bought $6,000 worth of bitcoin, ethereum and a fledgling spin-off called litecoin.
At the time, cryptocurrency was dirt cheap. A single unit of the budding tender was worth about $1,000, making Rochman the proud owner of 4.8 bitcoin and a remaining handful of litecoins and ethereum. (Today, one bitcoin is valued at $37,634).
Admittedly, some of his friends thought the investment was unwise.
“Most people honestly told me not to participate. They said I wasn’t going to be okay — that I would lose money that could have gone elsewhere,” Rochman said.
“They were super right.”
Rochman wrote down the password for his Coinbase account and promptly forgot about the investment. He was not reminded of the funds until January 2021, when the price of bitcoin soared as retail investors, restless amid public health restrictions, poured their money into cryptocurrency.
When Elon Musk posted “#bitcoin” to his Twitter profile in late January, tweeting, “In retrospect, it was inevitable,” the price of the much-hyped currency rose $5,000 in an hour. A few weeks later, when Tesla announced it would accept bitcoin as a legitimate payment for its products, the price spiked even higher.
It was time to sell. “Finally,” thought Rochman. His crypto investments were much more valuable than the contents of his TFSA. His dreams of financial freedom came true — with this crypto windfall, now valued at a whopping $205,000, Rochman would make a down payment on a house and open a trust fund for Avery’s college education.
“It was the most money I’ve had in my entire life,” he said.
Rochman tried several passwords to regain access to his account, which had been untouched for about four years. None worked. He contacted Coinbase’s help desk, who sent a link to reset his password. He has not received it.
For several months, his situation turned into a bureaucratic ordeal worthy of Kafka.
It appeared that Coinbase initially did not believe that Rochman was the real beneficiary of his cryptocurrency and closed his account.
“We have checked your account and determined that you are not eligible to use the Coinbase platform to purchase cryptocurrency, use our deposit services or link payment methods,” the company wrote to him on April 6.
“For security reasons, we are unable to disclose the factors that led to the account closure.”
Not only are cryptocurrencies prone to wild swings in value — for the perspective, bitcoin rose 1,030 percent from the start of the pandemic to November 2021 before falling 55 percent from December 2021 to May — but the platforms they trade on are subject to sporadic shocks. security breaches that wipe out investors’ profits faster than the free market can collapse.
According to Chainalysis, a crypto software and research firm, hackers stole a record $3.2 billion (US) worth of cryptocurrency in 2021. That is a fivefold increase compared to 2020.
Most recently, in March, hackers broke into a crypto platform called the Ronin Network, part of a popular video game called Axie Infinity, and stole $615 million from thousands, if not millions, of members.
The most vigilant crypto enthusiasts store their money in digital wallets on their own computers, completely separate from exchange platforms. But those who casually dabble in the cryptosphere often keep their money with exchanges such as Coinbase, which is now considered the largest exchange in the US.
Similar to a bank, users deposit their currencies into “custody wallets” that are assigned to the customer’s account, but remain under the control of the exchange. However, unlike banks, there is no government-backed financial claims scheme to cover those deposits if the funds are lost or the platform goes bankrupt.
It wasn’t until Rochman filed a report with the York Regional Police Department that the company reopened his account.
At that time, the value of bitcoin had fallen sharply. Tesla had reversed the course of its bitcoin pledge, arguing that the cryptocurrency’s harsh environmental impact negates the entire goal of selling climate-friendly cars. And in El Salvador, which had recently adopted bitcoin as legal tender, things were not going well.
But the state of the crypto market didn’t matter. Rochman’s money was missing. His account flashed a discouraging “$0.00.” And according to the transaction history of his account, Rochman’s crypto collection was sold in January – not by him.
“I remember just sitting there and staring at the empty bill. It’s hard to explain now, but I felt completely numb. My hands were shaking; I was sweating,” Rochman said.
During a Zoom call, his fiancée tried to comfort him. She also suggested to stop buying cryptocurrency.
Later that year, in September, Coinbase distributed a massive email to its customers that appeared to confirm Rochman’s suspicions. By early 2021, hackers had successfully liquidated the funds of at least 6,000 customers, in part by exploiting a flaw in the exchange’s two-factor authentication system, the company said.
The hackers had used a large-scale phishing campaign to trick customers into providing email addresses, passwords and phone numbers, the company estimates.
While Coinbase said it would compensate customers for stolen funds, Rochman said he never received a refund or confirmation from Coinbase that his account was included in the hack.
In a statement to the Star, Coinbase said, “We are unable to share details about Mr. Rockman’s (sic) account due to customer confidentiality. In most cases, Coinbase will not cover losses due to unauthorized access to Coinbase accounts if due to a compromise of customer credentials, which is often the cause of account takeovers.
But they acknowledged the seriousness of the crime.
“These are terrible crimes that can have major consequences for consumers. With more and more of our personal information available online, it is becoming increasingly important for consumers to understand how to protect their personal email accounts and mobile phones from unauthorized third parties,” the company wrote.
The best protection, Rochman says now, is not owning any cryptocurrency at all. The family hasn’t made a down payment on a house and Avery’s college fund is empty. To make ends meet, Rochman is still diving into his savings accounts, which have now dropped to $6,000.
“It didn’t feel real. It still doesn’t feel real,” he said.
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