Key Takeaways
- Phantom Technologies faces a lawsuit for negligence and regulatory violations after a $500,000 hack.
- The breach exposed Phantom as unregistered, with insecure key storage, leading to massive losses for Wiener Doge investors.
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A group of investors led by attorney Liam Murphy has filed a lawsuit against Phantom Technologies and OKX, alleging that severe security flaws in Phantom’s popular crypto wallet led to the theft of over $500,000 in digital assets and triggered the collapse of Murphy’s digital asset project, Wiener Doge.
Filed in the Southern District of New York, the complaint claims Phantom falsely advertised its wallet as secure while knowingly storing users’ decrypted private keys in browser memory—a design that allowed hackers to drain funds without bypassing two-factor authentication or security checks.
According to the filing, on January 20, cybercriminals exploited a vulnerability in Phantom’s browser extension, where private keys were stored insecurely.
The attacker successfully gained unauthorized access to Murphy’s crypto holdings worth over $500,000 and then liquidated the holdings, causing a 99% drop in the value of Wiener Doge.
The Solana-based meme coin, valued at over $3 million at its peak, plummeted from $3.1 per token to under $0.01, according to the complaint. It’s noted that the hacker used Phantom’s built-in “Swapper” tool to convert the stolen tokens to Solana.
“Phantom did not merely fail to anticipate cyberattacks—it knew exactly how users were being compromised and made a calculated decision to remain silent,” per the filing.
“Phantom’s leaders knew that the browser wallet stored users’ decrypted keys in active memory. They knew that novice users were routinely targeted by malware, phishing scripts, and rogue extensions. They knew that many victims were losing significant funds,” the document reads.
Seven major claims are made against Phantom, including operating as an unregistered trading platform, negligence in cybersecurity protection, false advertising, and aiding money laundering through OKX.
“OKX knew that Phantom had not registered its Swapper as an SEF with the CFTC,” the filing states.
“OKX’s integration was the direct enabler of the unauthorized liquidation of Liam’s assets. Without OKX’s routing, pricing, and execution services, the cybercriminal would not have been able to convert Liam’s $500,000 in Wiener Doge tokens to SOL using Phantom’s app,” it adds.
Thirteen additional plaintiffs, consisting of Murphy’s friends and family, joined the lawsuit after losing investments in Wiener Doge. The group seeks damages of $3.1 per lost token.
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