Major bitcoin exchange loses $5m in hack

Bitcoin exchange Bitstamp was forced to freeze user accounts yesterday after hackers stole 19,000 bitcoins over the weekend, amounting to more than $5 million in the virtual currency.

The company is mounting an investigation, though it was not immediately clear how the theft happened or who is responsible. In a statement on its site on Monday, Bitstamp warned users not to deposit any Bitcoin to previously issued addresses, and assumed liability for any bitcoins lost prior to the release of this warning.

The company reassured users that only a “small fraction” of customer bitcoins are susceptible to such an attack, since up to 90 per cent of Bitstamp’s bitcoin reserves are held in cold storage. The breach put the remaining 15-20 per cent of bitcoins maintained in online servers at risk of theft.

In May Bitstamp held 183,497 bitcoins – about $96.9 million at the time – in its cold wallet reserve. Bitcoin aficionados have speculated that a large transaction evident from Sunday morning of 18,866 bitcoins – about $5.1 million – could be the bitcoins stolen from Bitstamp’s hot wallet.

The breach has shaken the bitcoin community somewhat, perhaps faintly echoing the implosion of Japanese bitcoin exchange Mt. Gox last year after it lost hundreds of millions of dollars in bitcoin. After the Japanese exchange was compromised, bitcoin lost half its value.

Bitstamp’s temporary closure caused quoted bitcoin prices, such as those quoted on BitPay’s Bitcoin Best Bid which uses Bitstamp data, to become inaccurate. These and other products provided by some payment processors, bitcoin ATMs and advanced trading platforms had to be suspended and others re-tailored due to the breach.

Related reading

Leave a comment