In May 2025, Coinbase, one of the world’s largest cryptocurrency exchanges, faced a serious breach. Cybercriminals bribed overseas customer support contractors to leak sensitive customer data, then demanded a $20 million ransom in Bitcoin to keep it private.

Led by CEO Brian Armstrong, Coinbase refused to pay. Instead, it offered a $20 million bounty for the perpetrators’ capture. A bold, principled move, but a costly one. Early estimates suggest the total impact could exceed $400 million, accounting for remediation, reputational damage, and operational disruption. 

For startups, this incident is a clear warning: cybersecurity threats aren't always technical, and they can often be human.

The Hidden Risk Vector: People

This wasn’t a case of sophisticated hacking or advanced malware. It was a straightforward case of human compromise. Cybercriminals successfully bribed overseas contractors to leak customer names, emails, partial Social Security numbers, and transaction histories.

While no passwords or crypto funds were directly accessed, the damage to customer trust and operational integrity was significant and lasting.

For startups, the takeaway is simple but critical: your most vulnerable systems may not be digital. They may be the people and vendors you rely on. As startups grow, outsourcing support or back-office work often makes sense. But without strict oversight, that efficiency can come at a steep cost.

Smarter Risk Management Starts with Operational Discipline

Risk management isn't just about tech. It's about how your business operates—and how you manage people and partners.

“Ultimately, effective risk management is about enabling founders to build companies that can withstand unexpected shocks and continue growing sustainably,” says Sam Hodges, CEO and co-founder of Vouch.

Manage the human layer:
Vet contractors and vendors thoroughly. Limit access to sensitive systems. And monitor for signs of insider threats. Simple, clear boundaries—combined with ongoing vigilance—can prevent costly breaches.

Prepare early:
Every startup, no matter the size, needs an incident response plan. Define roles, set up communication channels, and rehearse the basics. Don’t wait until after something goes wrong.

Ask sharper questions of your vendors:

• Where is our data stored and who has access?
• What monitoring or controls are in place?
• How will we be notified if something goes wrong?

These straightforward queries can help you spot potential vulnerabilities before they’re exploited.

Strong leadership requires anticipating worst-case scenarios: not just technologically, but operationally and financially. Risk management isn’t a compliance task. It’s a core responsibility.

"Ultimately, effective risk management is about enabling founders to build companies that can withstand unexpected shocks and continue growing sustainably."

Building Financial Resilience With Insurance

For companies in fintech, healthtech, or other sensitive industries, cyber incidents can be devastating.

Insurance can’t prevent a breach. But it can determine whether your company recovers or folds.

Cyber Insurance: A First Line of Financial Defense

Cyber coverage typically helps with the immediate aftermath, including:

• Data and privacy breach coverage: To assist in managing the aftermath of data or privacy breaches, including costs for breach response, legal fees, and third-party expenses.
• System restoration costs after an incident: To cover expenses related to identifying the breach source and restoring affected systems to normal operation.
• Protection against cybercrime: To provide financial safeguards against cybercrimes such as hacking and data breaches, ransomware attacks, and social engineering. These can be extremely helpful to include in a policy in the case of a breach that leaves your company open to financial liabilities.
• Business interruption coverage: To compensate for income loss resulting from cyberattacks that disrupt or halt business operations.

For Coinbase, these costs alone could run tens of millions. Without coverage, most startups wouldn’t survive the hit.

D&O Insurance: Protecting Leadership Decisions

Refusing to pay a ransom may be the right decision, but it also opens the door to scrutiny. Investors, customers, regulators, and even courts may second-guess leadership in the aftermath. In fact, Coinbase is facing a class action lawsuit from investors.

D&O (Directors & Officers) insurance helps protect your leadership team if decisions made during a crisis lead to legal or financial consequences. It’s a critical safeguard for startups navigating high-stakes choices.

“Smart insurance coverage gives startups the flexibility and confidence to make principled decisions, even when facing tough, costly crises,” says Hodges.

Operational and Reputational Risk Coverage: Going Further

Some risks extend beyond the breach itself. Specialized policies can help cover:

• Revenue losses from operational disruptions
• Crisis communications and expert advisory costs
• Infrastructure upgrades needed post-incident

As Coinbase’s experience shows, even when you respond decisively, the financial fallout can be immense. Smart insurance steps in not just for clean up, but to keep your business alive.

"Smart insurance coverage gives startups the flexibility and confidence to make principled decisions, even when facing tough, costly crises."

What Every Company Needs to Know

Insurance is only effective when it fits your real risk profile. To get it right:

• Know your exposure: Run cybersecurity and operational risk assessments regularly.
• Customize your coverage: Partner with an insurer who understands your sector and growth stage.
• Update often: As your company scales and your vendor network expands, your policies should evolve, too.

The Coinbase breach isn’t just a cybersecurity story. It’s a case study in operational risk, leadership pressure, and long-tail financial exposure. And it reinforces one truth: startups can’t afford to treat insurance as an afterthought.

Assess your risk posture before you’re forced to. Identify your exposures. Strengthen your defenses. And ensure you’ve got the financial protection to survive the unexpected.

Not sure if your coverage matches your exposure? Vouch can help you evaluate your risk and tailor a strategy to match.