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FTC Targets Drizly and Its CEO Over Cybersecurity Failures That Led to Data Breach

The Federal Trade Commission (FTC) this week announced an administrative complaint against online alcohol marketplace Drizly and its CEO, James Cory Rellas, over the company’s poor data security practices.

The FTC acted on the company’s security failures that led to a data breach impacting the personal information of over 2.5 million individuals, and which occurred even though Drizly and Rellas were informed of existing security issues two years prior.

Because the company failed to implement strong protections for customer data, the FTC is now requiring Drizzly to destroy unnecessary data and to collect less information from its customers, and binds Rellas to specific data security requirements.

“Our proposed order against Drizly not only restricts what the company can retain and collect going forward but also ensures the CEO faces consequences for the company’s carelessness. CEOs who take shortcuts on security should take note,” FTC director Samuel Levine said.

The Boston-based Drizly, which was acquired by Uber in 2021, operates an online store where individuals of legal drinking age can order beer, wine, and alcohol at retailers, for delivery.

The company collects customers’ personal information, including email and postal addresses, phone numbers, device identifiers and location information, and more. The data is stored on AWS servers.

In 2018, after a Drizly employee posted a set of credentials on GitHub, hackers accessed the company’s servers and deployed cryptocurrency miners. Two years later, a hacker compromised a Drizly employee’s account, accessed corporate GitHub credentials, and stole customer information.

According to the FTC, Drizly and Rellas failed to implement basic security protections for the collected data, did not use multi-factor authentication, did not limit employee access to personal data, and did not develop adequate security policies.

Furthermore, the FTC’s complaint alleges that the company and its CEO stored critical database information on an unsecured platform, did not monitor its network for security threats, and exposed customers to hacking and identity theft once the stolen data was traded on dark web sites.

The FTC is requiring Drizly to limit its data collection practices, destroy unnecessary data, and implement a comprehensive information security program to ensure that it can prevent similar security incidents from occurring.

The commission’s order applies specifically to Rellas, requiring him to implement security programs at any company he may be moving to, if that business is collecting information from over 25,000 individuals, and “where he is a majority owner, CEO, or senior officer with information security responsibilities.”

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