TLDR
- Phantom wallet faces lawsuit over alleged security flaws that led to $500K Wiener Doge token theft
- Lawsuit claims Phantom stored private keys in unencrypted browser memory, making them vulnerable to malware
- Attorney Liam Murphy and 13 other plaintiffs seek $3.1 million in damages
- The theft allegedly destroyed the value of the entire Wiener Doge project
- Lawsuit also names exchange OKX as defendant for enabling unauthorized liquidations
Phantom Technologies, creator of one of Solana’s most popular crypto wallets, is facing legal action after alleged security flaws led to the theft of over $500,000 in Wiener Doge (WIENER) tokens. The lawsuit, filed April 14 in the Southern District of New York, claims these vulnerabilities directly caused the collapse of the meme coin project.
Attorney Thomas Liam Murphy and 13 other plaintiffs allege that Phantom wallet exposed users to malware and crypto theft through fundamental design flaws. The suit claims the company stored users’ private keys in “unencrypted browser memory,” making them vulnerable to extraction by malware.
According to court documents obtained by Decrypt, a cybercriminal “hacked into Liam’s personal computer and exported Liam’s private key to his Phantom wallets from his web browser’s working memory.” This gave the attacker “unrestricted access” to Murphy’s three linked Phantom wallets without needing to bypass multi-factor authentication.
The Attack and Its Aftermath
The breach allegedly occurred on January 20 when hackers exploited the vulnerability in Phantom’s browser extension. Court documents state that after gaining unauthorized access to Murphy’s holdings, the attacker used Phantom’s built-in “Swapper” feature to liquidate Wiener Doge tokens worth approximately $500,000 for only $37,537 in Solana (SOL).
This mass liquidation reportedly destroyed the value of the entire Wiener Doge project. The Solana-based meme coin, which had reached a market capitalization of $3.1 million at its peak according to data from GeckoTerminal, plummeted from $3.1 per token to under $0.01.
Murphy claims he reported the theft to Phantom immediately. The company allegedly responded that it operated “a noncustodial wallet,” which meant that Murphy bore “sole responsibility” for any loss of his crypto.
The lawsuit further alleges that Phantom “lacked any system for transaction velocity checks, geolocation anomalies, or withdrawal limits,” comparing the Solana wallet unfavorably to how Coinbase wallets operate.
Exchange Partner Also Named in Lawsuit
The suit also names OKX, a crypto exchange that partnered with Phantom in November 2024. The complaint cites OKX’s guilty plea to federal money laundering charges for facilitating $5 billion in illicit transactions and argues that Phantom’s “failure to disclose its direct integration with OKX” was “deceptive.”
“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,” the filing states.
Seven major claims are made against Phantom in the lawsuit. These include operating as an unregistered trading platform, negligence in cybersecurity protection, false advertising, and aiding money laundering through OKX.
Phantom, valued at over $3 billion and widely regarded as the go-to wallet for Solana blockchain users, hosts assets worth approximately $25 billion across 10 million active users, according to the lawsuit.
A Phantom spokesperson told Decrypt: “We are aware of the lawsuit that has been filed against Phantom, strongly deny any allegations of wrongdoing, and look forward to demonstrating why this lawsuit should be dismissed. The claims in this lawsuit are entirely without merit.”
The company stated it gives users full control of their funds and can’t prevent scams from malicious links, but works with law enforcement when criminal activity is reported. Phantom also said it offers in-app security education and safety resources.
The plaintiffs are seeking at least $3.1 million in damages, claiming Phantom violated the Commodity Exchange Act by operating as an unregistered trading platform while evading regulatory oversight through “superficial claims of decentralization.”
Murphy and OKX did not immediately respond to requests for comments from media outlets.
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