Phantom Wallet Sued Over $500K Meme Coin Theft Linked to Alleged Security Flaw

A lawsuit filed Monday against Phantom Technologies alleges that security vulnerabilities in its crypto wallet, Phantom, led to the theft of over $500,000 worth of Wiener Doge (WIENER) tokens from a developer's account.

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," a copy of the court document obtained by Decrypt reads.

The attacker gained "unrestricted access to all of the funds in Liam's three co-linked Phantom wallets" without needing to bypass multi-factor authentication, the complaint claimed.

A complaint filed April 14 in the Southern District of New York by crypto law firm Murphy's Law founding partner Thomas Liam Murphy and 13 other plaintiffs alleges that Phantom exposed users to malware and crypto theft due to fundamental design flaws, despite marketing its security as “best-in-class.”

Phantom, valued at over $3 billion and widely regarded as the go-to wallet for Solana blockchain users, allegedly stored users' private keys in "unencrypted browser memory," making them vulnerable to extraction by malware.

Checks and limits

Murphy claims he reported the theft to Phantom immediately, but the company allegedly responded that it operated "a noncustodial wallet," which meant that Murphy bore "sole responsibility” for any loss of his crypto.

As a major crypto wallet, Phantom hosts assets worth approximately $25 billion across 10 million active users, the lawsuit claims.

It further alleges a cybercriminal used Phantom's built-in "Swapper" feature to liquidate Wiener Doge tokens worth approximately $500,000 for only $37,537 in Solana (SOL).

That mass liquidation allegedly destroyed the value of the entire Wiener Doge project, which had reached a market capitalization of $3.1 million at peak, according to data from GeckoTerminal.

Phantom "lacked any system for transaction velocity checks, geolocation anomalies, or withdrawal limits," comparing the Solana wallet to how Coinbase wallets operate,  the complaint reads.

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.

Phantom's "failure to disclose its direct integration with OKX" was "deceptive," the suit argued.

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."

Phantom has not yet issued a public response to the allegations. Phantom, Murphy, and OKX did not immediately return Decrypt's request for comments.

Edited by Sebastian Sinclair