BlockTower's Ari Paul Accuses Coinbase of Hiding $1 Billion in Hacks Tied to Lazarus Group
A week-old dispute between BlockTower Capital founder Ari Paul and Coinbase has pulled in a current Coinbase employee, a former one, and a serious question the industry would rather not answer right now: does the biggest custodian in Bitcoin have a hack problem it never disclosed.
THE $25 MILLION THAT STARTED IT
The thread traces back to Paul's post on September 28. He wrote that Coinbase "lost" $25 million of his firm's money a couple of years ago, that it turned out Coinbase was "actually covering up massive and repeated hacks," that Coinbase still would not return the money, and that his team traced the pattern to at least a dozen other affected firms and over $1 billion covered up. Paul is the founder of BlockTower Capital, a crypto and traditional-asset investment firm.
Coinbase pushed back through its support account. It said the exchange "is not hiding a series of hacks and we certainly didn't lose $1 bilion," adding that it advises customers on securing API keys and does not retain the information needed to transact on customer accounts.
A FORMER EMPLOYEE OFFERS A DIFFERENT STORY
Justin Mart, who previously worked in corporate development and ventures at Coinbase, questioned Paul's account, saying he would "bet a ton of money the accusations are far far worse than reality," and argued it was more likely that BlockTower's own credentials were stolen, that the Lazarus Group used them to withdraw funds, and that Coinbase simply processed withdrawals it had no way to flag as fraudulent.
Paul rejected that framing directly. He called it "Very wrong," said external forensic firms and the Secret Service were involved, and said his team traced the attack to "a specific Coinbase codebase," with the same attacker, "likely Lazarus group, but we're not 100% sure," repeatedly compromising Coinbase over many months.
A DOSSIER, A LAWSUIT THREAT, AND A STANDOFF
Paul says he has stayed quiet on specifics because of ongoing legal process, not because he lacks proof. He has repeatedly invited Coinbase to sue him for libel rather than pursue the forced arbitration he says the company used against him before. He has offered a trade: if Coinbase agrees not to pursue legal action against him, he will release what he calls a full dossier.
Coinbase has not issued a detailed public rebuttal beyond its initial support-account statement, and no court filings, forensic reports, or other documentation have been made public by either side.
WHY THIS LANDS NOW
The allegations surface days after the Senate's cloture vote on the CLARITY Act failed 49 to 50 on September 15, a bill Coinbase had lobbied hard for as part of the industry's push for federal market-structure rules. A custody scandal at the sector's most prominent exchange, true or not, is the kind of headline that makes the next attempt at that legislation harder to sell.
It also reinforces the one piece of advice Bitcoiners have repeated through every cycle: an exchange is where you buy, not where you keep. If a dozen institutional clients really did lose access to funds through an exchange account, the lesson isn't really about Coinbase specifically. It's about what happens to anyone who treats a trading venue as a vault.
This story comes from the Simply Bitcoin Live show. Watch the full episode.
