Federal Appeals Court Reinstates Michael Terpin’s $25M Cryptocurrency Lawsuit Against AT&T

A recent ruling by a panel from the Ninth Circuit Court of Appeals has breathed new life into the lawsuit filed by cryptocurrency investor Michael Terpin against telecommunications giant AT&T. This lawsuit alleges that AT&T’s failure to secure Terpin’s phone account led to a SIM swap attack, resulting in the theft of $23.5 million in cryptocurrency.

Previously, a lower court had dismissed some of Terpin’s claims, but the appellate court has now reinstated a crucial part of the lawsuit. Specifically, the court revived Terpin’s claim under Section 222 of the Federal Communications Act (FCA), which mandates telecom carriers to protect customer proprietary network information.

According to a Bloomberg report, while the appellate panel narrowed the scope of Terpin’s claims, it crucially overturned the dismissal of the fraud and negligence claims. The court held that Terpin had demonstrated a triable issue of fact, arguing that AT&T’s failure to secure his account during a SIM swap attack directly exposed him to hackers who subsequently stole his cryptocurrency.

The court noted that the fraudulent SIM swap allowed the hackers to gain control of Terpin’s phone number, granting them access to his personal information. This breach enabled the hackers to alter passwords and transfer $23.5 million worth of cryptocurrency from Terpin’s digital wallets.

The incident dates back to January 2018 when Terpin was targeted by a group of hackers led by Ellis Pinsky, who was just 15 years old at the time. According to Terpin’s lawsuit, the hackers paid an AT&T employee to transfer Terpin’s phone number to a SIM card controlled by them. Despite AT&T implementing enhanced security measures in 2017, such as a six-digit passcode, the hackers managed to circumvent these protections.

Once they had control of Terpin’s phone number, the hackers reset his account passwords and siphoned off $23.5 million in cryptocurrency. Although Pinsky later returned his share of the stolen funds, another hacker, Nicholas Truglia, was ordered by a Los Angeles court to pay Terpin $76.3 million in damages.

In a related incident, AT&T faced another breach in July, where hackers reportedly stole customers’ call records and text messages. Reports suggest that AT&T agreed to pay $410,000 in bitcoin to the hackers to have the stolen data deleted, though the company has neither confirmed nor denied this payment. Blockchain analysis firms like Chainalysis have tracked transactions that corroborate the payment allegations.

With the court’s reinstatement of Terpin’s claim under the FCA, the lawsuit is now set to move forward to trial. Terpin is seeking $23.5 million in damages, along with prejudgment interest and attorney’s fees. His lawyer, Pierce O’Donnell, expressed optimism, stating that the appellate court’s ruling could pave the way for other courts to allow consumers to sue telecom companies for SIM swap fraud.

AT&T has expressed regret over the theft of Terpin’s assets and reiterated that most of the accusations against them were dismissed by the court. The company remains confident in its ability to defend against the remaining allegations related to the FCA.

This case has garnered significant attention as the frequency of cryptocurrency-related hacking incidents continues to rise. Blockchain experts, including the well-known investigator ZachXBT, have recently exposed another major scam, this time in the UK. ZachXBT’s investigation revealed that over 250 users were defrauded using fake Bybit demo accounts, resulting in losses amounting to $660,000.

As the legal battle between Terpin and AT&T progresses, it underscores the growing concerns about security measures within the telecommunications and cryptocurrency sectors. The outcome of this case could potentially set a precedent for how telecom companies are held accountable in the face of increasing cyber threats.