Key Takeaways:
Phantom Applied sciences is being sued for allegedly storing personal keys in unencrypted browser reminiscence, resulting in a $500,000 crypto theft.The stolen funds had been liquidated utilizing Phantom’s in-app swap software, inflicting the collapse of the meme coin Wiener Doge.The lawsuit, additionally focusing on OKX, calls for $3.1 million in damages and alleges violations of the Commodity Alternate Act.
A significant lawsuit has shaken the crypto pockets area as Phantom Applied sciences, a number one Solana-based pockets supplier, faces authorized motion after a big safety breach allegedly led to the lack of over $500,000 value of digital property. The breach additionally triggered a near-total collapse within the worth of the meme coin Wiener Doge, with buyers now in search of tens of millions in damages.
Learn Extra: Phantom Pockets Secures $150M in Collection C and the Valuation Hits $3 Billion
Phantom Pockets Accused of Important Safety Flaw
A gaggle of buyers led by legal professional Thomas Liam Murphy filed a lawsuit within the Southern District of New York on April 14, accusing Phantom of negligence, false promoting, and regulatory violations. On the core of the grievance is the declare that Phantom’s pockets saved customers’ personal keys in unencrypted browser reminiscence, making them extremely weak to exploitation by malware and rogue browser extensions.
Murphy alleges {that a} hacker gained entry to his Phantom pockets by a browser vulnerability, extracting his personal key instantly from lively reminiscence without having to bypass multi-factor authentication. The cybercriminal then drained over $500,000 in Wiener Doge tokens, a Solana-based meme coin created by Murphy.
Utilizing Phantom’s built-in “Swapper” software, the stolen property had been transformed into Solana (SOL) and bought off. The sudden liquidation precipitated a 99% drop in Wiener Doge’s worth, with the worth crashing from $3.10 to beneath $0.01 per token.
Alleged Negligence and Regulatory Violations
The lawsuit claims that Phantom not solely did not safe consumer property but additionally knowingly ignored recognized vulnerabilities. Based on court docket paperwork, Phantom executives had been absolutely conscious that non-public keys had been saved in reminiscence accessible to browser processes.
“Phantom didn’t merely fail to anticipate cyberattacks—it knew precisely how customers had been being compromised and made a calculated resolution to stay silent,” the submitting alleges.
Additional, the plaintiffs argue that Phantom lacked fundamental safeguards sometimes present in custodial platforms, comparable to velocity checks, withdrawal limits, or geolocation anomaly detection. In contrast, exchanges like Coinbase have applied such measures for years.
Regardless of Murphy reporting the hack instantly, Phantom allegedly responded that it was a noncustodial pockets, inserting full duty on the consumer. The corporate reportedly denied legal responsibility, although it had facilitated the transaction by its personal interface.
Learn Extra: Phishing Scams Dominate Crypto in 2024: What We Discovered About Safety
Phantom–OKX Integration Sparks Controversy
The swimsuit additionally alleges that OKX ought to have recognized that Phantom’s built-in Swapper perform was not registered as a Swap Execution Facility (SEF) with the U.S. Commodity Futures Buying and selling Fee (CFTC). OKX has beforehand pleaded responsible to cash laundering-related expenses, additional intensifying scrutiny.
The plaintiffs assert that each Phantom and OKX functioned as unregistered buying and selling platforms, regardless of promoting their instruments as secure and user-controlled.
Plaintiffs Search $3.1M in Damages
The group of 14 plaintiffs, together with Murphy and his family and friends, is now in search of $3.1 million in damages—equal to $3.10 per misplaced Wiener Doge token. This determine displays the token’s peak market value earlier than the incident.
Phantom, which is utilized by over 10 million customers and hosts $25 billion in digital property, is accused of working extra like an alternate than a conventional crypto pockets.
The authorized submitting lists seven main claims towards Phantom, together with:
Working as an unregistered buying and selling platformNegligence in safety practicesFraudulent advertising and marketing of safety featuresAiding and abetting cash laundering by OKX
Phantom’s Fast Rise Now Beneath Hearth
Phantom has grown quickly, elevating $150 million at a $3 billion valuation in January 2025. It now helps not solely the Solana ecosystem but additionally networks like Sui and Base. Phantom studies helped to commerce extra over $20 billion in 2024, is the fastest-growing Web3 pockets by quantity.
Although it’s market place, this case attracts consideration to rising shopper and regulatory scrutiny of wallets with built-in swap capabilities. Critics say these qualities elevate retail investor dangers by blurring the excellence between pockets and alternate.
Phantom has not but revealed an intensive public response however has mentioned it “strongly denies any allegations of wrongdoing” and hopes to indicate the assertions “completely with out advantage.”
