Hacking Riddle As Bitcoin Site Goes Offline

Hacking Riddle As Bitcoin Site Goes Offline

Bemused holders of the virtual currency Bitcoin are wondering what has happened to millions of dollars of their money as a major online trader’s web site closed without warning.

MtGox suddenly went offline among rumours and speculation that hackers had breached the security code of the digital currency.

Bitcoin has had a brief chequered history of involvement in money-laundering and organised crime, including the suspected theft of $2.7 million of the currency from another web site earlier in the month.

The MtGox closure wiped nearly 10% of the value of Bitcoin – which fell from $550 to $500.

Visitors to the MtGox web site are welcomed with the message: “In light of recent news reports and the potential repercussions on MtGox’s operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.”

Security glitch hits traders

The statement is believed to refer to security code inside Bitcoin that hackers can exploit to make computers double amounts withdrawn from customer accounts.

However, six other Bitcoin traders issued a joint statement criticising MtGox in a desperate rearguard action to protect the currency’s value and reputation.

MtGox closing does not “reflect the resilience or value of Bitcoin”, say spokesmen for Bitcoin exchanges Coinbase and BTC China.

“This tragic violation of the trust of users of MtGox was the result of one company’s actions,” said the spokesman.

“As with anything new, some bad characters need weeding out. This is what we are seeing now.

“Strong Bitcoin companies managed by good teams and backed by strong investors will thrive and take Bitcoin forward as the future of online payment in the internet age.”

Earlier this week, MtGox promised customers they could start withdrawals “soon”.

Tarnished ‘insolvent’ reputation

But a report claimed that the exchange was “insolvent” after losing 744,408 Bitcoins worth about $350 million.

Unlike tangible currencies, Bitcoin is not regulated by a central bank or government.

Bitcoin prices have risen in recent months, mainly on the back of speculation by investors hoping the currency would win recognition as an international currency.

The hopes of this appear slim after the series of scandals and despite other exchanges battling to restore Bitcoin’s tarnished reputation.

“Bitcoin exchanges will coordinate efforts to publicly reassure customers that all funds continue to be held in a safe and secure manner,” said the spokesmen.