Coinbase API Exploit: How Attackers Bypassed 2FA in $15M Theft

Date: 2025-05-22

Incident Overview

A sophisticated API exploit targeting Coinbase allowed attackers to bypass multi-factor authentication (MFA) and drain ~$15M from user accounts. The breach exploited flaws in Coinbase’s OAuth token validation and targeted high-net-worth individuals.

Affected Systems:
– Coinbase user accounts (primarily institutional clients)
– Third-party apps integrated via Coinbase API

Timeline of Events

1. Initial Compromise (May 18, 2025):
   Attackers gained access to developer credentials for a third-party trading app linked to Coinbase’s API. Forensic logs suggest phishing via a fake “Coinbase Developer Portal” login page.
2. OAuth Token Hijacking (May 19):
   Stolen credentials were used to generate valid OAuth tokens with excessive permissions due to misconfigured scope settings (“full_access” instead of least privilege).
3. MFA Bypass (May 20):
   Attackers exploited a race condition in Coinbase’s session management system, reusing active sessions after legitimate MFA validation. This allowed withdrawals without fresh authentication prompts.
4. Exfiltration (May 21–22):
   Funds were siphoned via small, staggered transactions to obfuscate detection (~500 transfers under $30K each). Withdrawals were routed through privacy-focused altcoins (Monero, Zcash).
5. Detection & Response (May 22, 3:14 AM MT):
   Coinbase’s fraud team flagged anomalous withdrawal patterns and temporarily disabled API integrations. By then, ~$15M was irrecoverable due to blockchain finality.

Technical Analysis

Attack Vectors Used:

• Phishing + Credential Stuffing: Fake developer portal harvested credentials reused across services.
• OAuth Misconfiguration: Overprivileged tokens granted “account:write” access without IP/device checks.
• Session Replay Attack: Race condition allowed reuse of authenticated sessions post-MFA.

Exploited Vulnerabilities:

• CWE-639: Improper Authorization in OAuth Scope Handling
• CWE-613: Insufficient Session Expiration

Impact Assessment

Affected Users:~320 high-value accounts (Over 69k accounts in total)
Financial Loss: $15M+
Reputation Damage: Trust in API security eroded

Sector Implications: Crypto exchanges face heightened scrutiny over third-party app integrations and MFA resilience. Regulatory penalties under Canada’s Consumer Privacy Protection Act are likely.

Mitigation Recommendations by Cyberonix

1. For Exchanges/APIs:
2. Enforce granular OAuth scopes (e.g., “read_only” by default).
3. Implement session binding (IP/device fingerprints + short TTLs).
4. For Users:
5. Revoke unused API keys and audit third-party app permissions monthly.
6. Use hardware-based MFA (e.g., YubiKey) instead of SMS/TOTP for critical accounts.

3.Cyberonix Protections: Our Calgary-based SOC detected similar OAuth abuses in client environments using:
– Behavioral AI monitoring abnormal token usage patterns (XDR Platform)
– Phishing-resistant MFA enforcement

References

1.Coinbase Security Notice (2025-05-22)
2.CISA Alert on OAuth Threats (2025)

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