Like most people when they first invest in cryptocurrency, Shane Rochman thought bitcoin was the future. The economies of the world could collapse next week, he once proclaimed, 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 was starting a new business: a series of Toronto food tours led by standup comics (himself included). He had recently married, and his wife was pregnant with their first son, Avery.
Rochman needed to plan ahead. He wanted a home and an education 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 side-hustles weren’t quite paying the bills, and Rochman often found himself pulling money out of his savings. That’s when a friend told him about cryptocurrency – “the next big thing.”
Rochman opened an account with Coinbase, a Silicon Valley operation that lets members buy and sell cryptocurrencies, and purchased $ 6,000 worth of bitcoin, ethereum and a fledgling spinoff called litecoin.
At the time, cryptocurrency was dirt cheap. A single unit of the nascent tender was worth roughly $ 1,000, making Rochman the proud owner of 4.8 bitcoin and a leftover 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 told me not to get involved, honestly. They said it would not go well for me – that I’d lose money that could have gone somewhere else, ”Rochman said.
“They were super right.”
Rochman wrote down the password for his Coinbase account and promptly forgot about the investment. Only in January 2021 was he reminded of the funds, when bitcoin’s price surged as retail investors, restless during public-health restrictions, poured their money into cryptocurrency.
In late January, when Elon Musk placed “#bitcoin” in his Twitter profile and tweeted, “In retrospect, it was inevitable,” the price of the much-hyped currency jumped $ 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 grew even higher.
It was time to sell. “Finally,” Rochman thought. His crypto investments were far more valuable than the contents of his TFSA. His dreams of financial freedom were coming true – with this crypto windfall, now valued at a whopping $ 205,000, Rochman was going to place 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 get back into his account, which had sat untouched for about four years. None worked. He contacted Coinbase’s help desk, which sent a link to reset his password. He did not receive it.
Over several months, his situation devolved into a bureaucratic ordeal worthy of Kafka.
Coinbase, it seemed, did not initially believe Rochman was the true beneficiary of his cryptocurrency, and closed his account.
“We’ve reviewed your account and determined that you are not eligible to use the Coinbase platform to purchase cryptocurrency, use our deposit services, or link any payment methods,” the company wrote to him on April 6.
“For security reasons, we can not disclose the factors that led to the account closure.”
Not only are cryptocurrencies prone to wild swings in value – for perspective, bitcoin surged 1,030 per cent from the pandemic’s outset to November 2021 before plummeting 55 per cent from December 2021 to May – but the platforms they trade on are sporadically subject to security breaches that erase the gains of investors faster than the free market can tumble.
In 2021, hackers stole a record $ 3.2 billion (US) worth of cryptocurrency, according to Chainalysis, a crypto software and research firm. That’s a fivefold increase from 2020.
Most recently, in March, hackers broke into a crypto platform called 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 of crypto enthusiasts store their funds on digital wallets on their own computers, totally detached 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 currency in “custodial wallets” that are assigned to the client’s account but remain under the control of the exchange. Unlike banks, though, there is no government-supported financial claim scheme to cover those deposits if the money is lost or if the platform goes bust.
It was not until Rochman filed a report with York Regional Police did the company reopen his account.
By that point, bitcoin’s value had dropped sharply. Tesla had reversed course on its bitcoin promise, arguing that the cryptocurrency’s harsh impact on the environment defeated the whole purpose of selling climate-friendly cars. And in El Salvador, which had recently adopted bitcoin as a legal tender, it was not going well.
But the state of the crypto market did not matter. Rochman’s funds were missing. His account flashed a daunting “$ 0.00.” And according to his account’s transaction history, Rochman’s crypto collection had been sold in January – not by him.
“I remember just sitting there, staring at the empty account. It’s hard to explain now, but I felt completely numb. My hands were shaking; I was sweating, ”said Rochman.
Over a Zoom call, his fiancée tried to console him. She also suggested he stop buying cryptocurrency.
Later that year, in September, Coinbase circulated a mass email to its clients that appeared to confirm Rochman’s suspicions. Early in 2021, hackers had successfully liquidated the funds of at least 6,000 customers, partly 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 giving up email addresses, passwords and phone numbers, the company reckoned.
While Coinbase said it would compensate clients for stolen funds, Rochman said he never received a reimbursement nor confirmation from Coinbase that his account was included in the hack.
In a statement to the Star, Coinbase said, “We are not able to share details about Mr. Rockman’s (sic) account due to customer confidentiality. In most cases, Coinbase does not cover any losses resulting from unauthorized access to Coinbase accounts due to a compromise of customer’s login credentials, which is often the cause of account takeovers. ”
But they acknowledged the gravity of the crime.
“These are terrible crimes that can have significant impact on consumers. With more and more of our personal information available online, it is increasingly important for consumers to understand how to protect their personal email accounts and cellphones from unauthorized third parties, ”the company wrote.
The best protection, Rochman now says, is owning no cryptocurrency at all. The family has not put a down payment on a house, and Avery’s college fund sits empty. To make ends meet, Rochman still dips into his savings accounts, which have now dropped to $ 6,000.
“It did not feel real. It still does not feel real, ”he said.
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