Wednesday, February 26, 2020

Customers To Pay For $65m Bitcoin Hack And Grab

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Horrified investors who have accounts with one of the world’s largest Bitcoin exchanges are set to lose more than a third of their money following a $65 million hack.

Even if their accounts were unaffected by the theft, Bitfinex will take 36% of their deposits to help compensate customers who lost Bitcoin.

Hong Kong’s Bitfinex, which is one of the world’s leading virtual currency exchanges, lost close to 120,000 Bitcoin to the hackers.

In return for bearing a share of the losses, customers will be given digital tokens that are effectively credit notes stating their losses but which can only be redeemed by Bitfinex or exchanged for shares in the company.

Investigators have no leads or clue to the identity of the hackers.

Bitcoin slumps in value

The theft is the second largest ever against a Bitcoin exchange, surpassed only by collapse of MtGox in Japan after Bitcoin worth $460 million were taken from deposits held by the company.

The exchange closed for almost a week to allow a systems review and a full investigation by police.

Following the Bitfinex attack, the price of Bitcoin slumped by a fifth from $607 to $480 as investors rushed to sell their holdings over concerns about security of the virtual currency.

When the exchange resumed trading, the exchange rate floated back to $580.

Bitcoin are held in electronic wallets managed by an online database called the blockchain.

Users are supposed to have high levels of electronic security keeping their Bitcoin safe, but hackers have breached the protection repeatedly.

Troubled past

Although Bitcoin and the blockchain is managed by the online currency users, no government, central bank or other official organisation is responsible for controlling transactions.

Bitfinex was the leading exchange for US dollar denominated Bitcoin transactions.

“We will look at various options to address customer losses later in the investigation,” said a spokesman for the exchange. “We ask for the community’s patience as we unravel the causes and consequences of this breach.”

Bitfinex is allegedly a second incarnation of troubled exchange Bitcoinca and based on the same source code.

Bitcoinca closed after two major Bitcoin thefts in 2012 totalling close to $300,000.

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