Michael Terpin, serial entrepreneur and pioneering
cryptocurrency investor, today filed a $223.8 million lawsuit
against AT&T (NYSE: T) on 16 counts of fraud, gross
negligence, invasion of privacy, unauthorized disclosure of
confidential customer records, violation of a consent decree,
failure to supervise its employees and investigate their criminal
background, and related charges in US District Court in Los
Angeles.
The suit arises from the January 7, 2018, theft of more than 3
million cryptocurrency tokens from Terpin by way of by a
digital identity theft by an AT&T agent of Terpin’s
cellphone account and transfer to an international criminal gang
being pursued by the FBI and multiple other federal and state law
enforcement agencies. AT&T’s gross negligence is compounded by
the fact it promised Terpin unbreachable security on its
end through a unique, purportedly unchangeable password following a
smaller SIM swap theft in June, 2017.
“AT&T’s studied indifference to protecting its customers’
privacy and financial assets is a metastasizing cancer, threatening
hundreds of millions of unsuspecting AT&T’s customers,” said
Pierce O’Donnell, senior partner at leading litigation firm
Greenberg Glusker in Century City, Los Angeles, which is lead
counsel for Terpin in this complaint. “Our client had no
idea when he initially signed up, nor when later he was promised
the highest level of security for his account, that low-level
retail employees with access to AT&T records, or people posing
as them, can be bribed by criminals to override every system that
AT&T advertises as unassailable.”
The complaint then goes on to detail the July 2018 arrests of
multiple SIM swap gang members, including Joel Ortiz, who was
arrested on July 12 in Los Angeles on 28 counts and is suspected of
stealing at least $5 million in cryptocurrency in similar hacks,
including a $1.5 million SIM swap of an AT&T subscriber during
New York Blockchain Week; and the July 18 arrest of Ricky Joseph
Handschumacher in Florida for his role in a gang that stole at
least $460,000 in bitcoin by hijacking SIM identities from AT&T
customers, allegedly using information from one of its members in
Michigan to effectively impersonate an AT&T customer service
representative. Terpin alleges that this gang or one acting
in similar fashion caused the SIM swap for the sole purpose of
stealing cryptocurrency using an employee in an AT&T retail
store in Connecticut on January 7, 2018.
-more-
Excerpts from the 69-page complaint:
Most troubling, AT&T does not improve its protections even
though it knows from numerous incidents that some of its employees
actively cooperate with hackers in SIM swap frauds by giving
hackers direct access to customer information and by overriding
AT&T’s security procedures. In recent incidents, law
enforcement has even confirmed that AT&T employees profited
from working directly with cyber terrorists and thieves in SIM swap
frauds.
AT&T’s subscriber privacy protection system is thus a
veritable modern-day Maginot Line: a lot of reassuring words
that promote a false sense of security…
The porosity of AT&T’s privacy program is dramatically
evident in this case, which follows a pattern well known to
AT&T. An experienced, high profile cryptocurrency
investor, Plaintiff Michael Terpin was a longtime AT&T
subscriber who entrusted his sensitive private information to
AT&T and relied on AT&T’s assurances and its compliance
with applicable laws. Given all the carrier’s hype about
protecting customer security, Plaintiff believed that it would keep
its promises about absolutely safeguarding him from a data breach
that could lead to the theft of tens of millions of dollars of
crypto currency.
Even after AT&T had placed vaunted additional protection on
his account after an earlier incident, an imposter posing as Mr.
Terpin was able to easily obtain Mr. Terpin’s telephone number from
an insider cooperating with the hacker without the AT&T store
employee requiring him to present valid identification or to give
Mr. Terpin’s required password.
The purloined telephone number was accessed to hack Mr. Terpin’s
accounts, resulting in the loss of over $24 million of
cryptocurrency coins.It was AT&T’s act of providing hackers
with access to Mr. Terpin’s telephone number without adhering to
its security procedures that allowed the cryptocurrency theft to
occur. 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.
AT&T is doing nothing to protect its almost 140 million
customers from SIM card fraud. AT&T is therefore directly
culpable for these attacks because it is well aware that its
customers are subject to SIM swap fraud and that its security
measures are ineffective. AT&T does nothing to protect its
customers from such fraud because it has become too big to
care.
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“Mainstream adoption of cryptocurrency cannot take place as long
as phone company employees are handing over critical unauthorized
access to the heart of everyone’s digital lives,” said Terpin.
“AT&T has a well-established track record of violating user
privacy and security, endangering billions of dollars in digital
assets, and must be called to account.”
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About Michael Terpin:
Michael Terpin is one of the highest profile thought leaders,
entrepreneurs and investors in the blockchain sector. He
co-founded the first angel group for bitcoin investors, BitAngels,
in early 2013, and the first-ever digital currency fund, the
BitAngels/Dapps Fund, in March 2014, and is currently a senior
advisor to Alphabit Fund, one of the world’s largest digital
currency hedge funds. Terpin’s work with more than 100 token
crowdsales, including Augur, Ethereum, MaidSafe, Neo and Qtum, led
to CNBC calling Terpin “the godfather of crypto.” He is
founder and CEO of Transform Group, the leading PR and advisory
company for the public blockchain industry, and he organizes the
long-running CoinAgenda global investor conference series and
monthly TokenMatch investor events.
Prior to his involvement in the blockchain, Terpin founded and
sold Marketwire, the first Internet-based press release
distribution company, now owned by the West Corp. division of
Apollo Global Management (NYSE: APO) and his first PR firm, The
Terpin Group, now part of FTI Consulting (NYSE: FCN). He is on the
board of Syracuse University’s prestigious Newhouse School of
Communications, and he is a popular speaker on global blockchain
circuit.
For a copy of the complaint and corresponding exhibits, please
visit the following links:
Complaint: https://www.greenbergglusker.com/content/uploads/2018/08/Complaint-as-Filed-3063362-1.pdf
Exhibits: https://www.greenbergglusker.com/content/uploads/2018/08/Exhibits-A-D-Filed-3063361-1.pdf
Media contact: Xenia von Wedel, xenia@transform.pr, +1 415 340-2792
Legal spokespersons and attorneys for plaintiff Michael Terpin:
PIERCE O’DONNELL (SBN 081298)
PODonnell@GreenbergGlusker.com
TIMOTHY J. TOOHEY (SBN 140117)
TToohey@GreenbergGlusker.com
PAUL BLECHNER (SBN159514)
PBlechner@GreenbergGlusker.com
GREENBERG GLUSKER FIELDS CLAMAN & MACHTINGER LLP
1900 Avenue of the Stars, 21st Floor
Los Angeles, California 90067-4590
Telephone: 310.553.3610
Fax: 310.553.0687
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