IRA Financial Sues Gemini Over $37M Crypto Heist

The lawsuit corroborates earlier reporting that hackers deployed a police SWAT team as “a ruse to distract IRA employees” on the day of the attack.

AccessTimeIconJun 7, 2022 at 2:56 p.m. UTC
Updated May 11, 2023 at 4:16 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

IRA Financial Trust, the crypto retirement account provider that in February lost $37 million to theft, sued Gemini – its custodian and trading partner – for allegedly sloppy security protocols that it claimed led to its customers’ accounts getting drained.

In a civil suit filed Monday in Federal district court, the South Dakota-based company pointed the finger squarely at Gemini for a hack that’s left dozens of retirement savers in disarray. Some of its clients previously told CoinDesk they had picked IRA Financial largely because of its association with the Winklevoss twins’ name-brand crypto exchange.

  • Rep. French Hill 'Rejects' Gensler's Argument Ahead of FIT21 Vote
    14:50
    Rep. French Hill 'Rejects' Gensler's Argument Ahead of FIT21 Vote
  • Donald Trump-Themed Meme Coins Are Breeding Crypto Millionaires
    01:04
    Donald Trump-Themed Meme Coins Are Breeding Crypto Millionaires
  • SEC's Gensler Pushes Back Against House Bill; Crypto Exchanges Form Coalition to Tackle Scams
    01:40
    SEC's Gensler Pushes Back Against House Bill; Crypto Exchanges Form Coalition to Tackle Scams
  • Former SEC Senior Trial Counsel on Spot Ether ETF Approval Outlook
    12:10
    Former SEC Senior Trial Counsel on Spot Ether ETF Approval Outlook
  • The IRA Financial complaint alleges that Gemini failed to protect its clients’ assets, claiming that a series of security steps all failed once thieves exploited IRA Financial’s “master key” on Feb. 8.

    “IRA has since learned – the hard way, as explained below – that whoever possesses the master key can bypass all the supposed security protections,” the complaint said. “Gemini never informed IRA about the power of this master key.”

    “We reject the allegations in the lawsuit,” a Gemini spokesperson told ConDesk. “Our security standards are among the highest in the industry and we are constantly updating them to ensure our customers are always protected. In this matter as soon as IRA Financial notified us of their security incident we acted quickly to mitigate the loss of funds from their accounts.”

    Heist details

    The lawsuit sheds little light on how thieves got a hold of the master key but it does corroborate CoinDesk’s February reporting that a SWAT team descended on IRA Finanical’s headquarters on the day of the hack.

    “The police later informed IRA that they believe the call was a ruse to distract IRA employees,” the complaint said.

    The hack itself saw thieves drain IRA Financial client accounts one by one. This piecemeal pilfering went on for two hours on Feb. 8 as IRA claimed it tried and failed to get Gemini to freeze all accounts. Millions of dollars were stolen in the interim, IRA Financial claimed.

    IRA Financial’s legal action adds another headache to Gemini’s mounting woes. The clients, too, could mount a fight; when CoinDesk last made contact with a group of hack victims in February they were shopping for lawyers in an attempt to get their money back.

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Danny Nelson

    Danny is CoinDesk's Managing Editor for Data & Tokens. He owns BTC, ETH and SOL.


    Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.