The Bitcoin Exchange Thefts You May Have Forgotten

The Bitcoin Exchange Thefts You May Have Forgotten

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Cryptocurrency exchange losses have been a nuisance since Bitcoin was first created. Many remember the loss of roughly 850,000 BTC in the demise of Mt Gox and the most recent 120,000 BTC Bitfinex compromise. However, over the course of the past eight years there has been various exchange hacks and/or inside jobs.

Also read: Review of the Cold Storage Hardware Wallet Cryptosteel

50+ Cryptocurrency Hacking Thefts Since Bitcoin’s Inception

Since 2009 there have been roughly over fifty hacking thefts against notable businesses associated with the Bitcoin industry. Millions of dollars worth of bitcoins have been stolen, lost, and compromised over the years. Each case has been mysterious, and many of these hacks remain unsolved. Today we discuss some of the exchange hacks and losses that may have been forgotten.

The Bitcoin7 Heist

The Bitcoin Exchange Thefts You May Have ForgottenBitcoin7 was a business operating in 2011 that was once the third-largest BTC/USD exchange behind Tradehill and Mt Gox. On October 5, 2011, the company reported a theft of 5,000 BTC allegedly stemming from a group of Russian hackers. However, many believe the breach was an inside job and employees ran off with the funds. The Bitcoin7 domain was later sold for $10,000 USD in 2013, but has been offline ever since this incident.

Linode Hacks

The Bitcoin Exchange Thefts You May Have ForgottenIn the Spring of 2012, the cloud-hosting business located in New Jersey, Linode, was compromised by hackers. Following the breach, attackers aimed their sights on eight Bitcoin businesses, such as Tradehill, Bitcoinica, and Bitcoin.cx. An estimated total of 46,653 BTC were stolen at the time. The biggest hit was against the Bitcoinica exchange, which suffered a loss of 43,000 bitcoins. The thief involved in these particular hacks is still to this day unknown, and many suspect it was perhaps a Linode employee. Tradehill was attacked, and remained offline during this attack, but suffered no losses.   

Two More Bitcoinica Hacks

The Bitcoin Exchange Thefts You May Have ForgottenIt seems Bitcoinica did not learn after the Linode scandal, and suffered two more subsequent hacks. On May 12, 2012, a hacker breached the Bitcoinica Rackspace server, according to the now-defunct exchange’s founder Zhou Tong. The exchange lost over 38,000 BTC during the spring incident. In July that same year, Bitcoinica was breached again, but this time it was a stash of BTC held on the Mt Gox exchange. 40,000 BTC were stolen. But following the heist, it was reported the funds were returned. The Bitcoinica hack is one of the most controversial within the industry as many well-known cryptocurrency community members were involved.

The Bitcoin Savings and Trust

The Bitcoin Exchange Thefts You May Have Forgotten
Trendon Shavers

In 2013, a 33-year-old Texan named Trendon Shavers was arrested for soliciting an estimated 200,000 BTC from 48 investors. The Bitcoin Savings and Trust was alleged to be the first securities platform based on Bitcoin as an asset class, but was really a giant Ponzi scheme. In July of 2016, Trendon Shavers was sentenced to pay restitution of $1.23 million to the 48 investors. Originally the U.S. Securities and Exchange Commission civil lawsuit ordered Shavers to pay $40.7 million when he was first arrested in 2014. The court had recognized his efforts to make things right, though he couldn’t pay everyone back.

The Bitfloor Hack

The Bitcoin Exchange Thefts You May Have ForgottenLeading U.S. Bitcoin exchange Bitfloor was breached in September of 2012, losing over 24,000 BTC during the incident. Bitfloor explained at the time that the exchange’s hot wallet data was mistakenly held on the company’s servers which led to the hack. No bitcoins were returned to customers after the hack even though the company resumed trading and promised restitution. “As funds are available for repayment, they will be dispersed on a pro-rated basis,” explained Bitfloor’s founder and operator Roman Shtylman. However, according to the company, Bitfloor’s banks had ceased doing business with the startup and customers never saw their funds again.

Mintpal

The Bitcoin Exchange Thefts You May Have ForgottenAt one time the cryptocurrency exchange Mintpal was one of the top trading platforms. Many traders used the service to exchange bitcoins and altcoins as the exchange processed large digital currency trading volumes. In the fall of 2014 customers were told Mintpal was going to have new ownership and rebrand as “Mintpal 2.0.” The exchange was acquired by Moopay executive “Alex Green” who many believe was a shady scammer. A total of 3,894 BTC was stolen from Mintpal customers and never returned. Alex Green (also known by another alias, Ryan Kennedy) had fled the cryptocurrency scene. Green has since been arrested by the authorities, but for rape charges, as reported by Bitcoin.com. The Moopay executive was not convicted for the Mintpal theft and has yet to claim responsibility.

Exchange Hacks and Losses are Less Frequent, but the Community Should Always Remember These Mistakes

Hacks have occurred quite a bit in the Bitcoin industry, but each attack holds the exchange or shady actors involved accountable. These problems have never been attributed to the Bitcoin protocol except by ignorant mainstream media skeptics. Breaches and compromises such as these have since diminished since the early days and hacks are far and few between. The most recent hacks over the past year or so have been Shapeshift, Cryptsy, and Bitfinex. Both Shapeshift, and Bitfinex have managed to stay operational and rectify losses. Cryptsy founder Paul Vernon is nowhere to be found, though lawsuits abound.

Things have definitely gotten better over the years, and community members are constantly reminding people not to hold cryptocurrency reserves on exchanges. As the saying goes, if you don’t hold your private keys, you don’t own Bitcoin. The cryptocurrency community sometimes forgets some of the hacked exchanges of the past, but remembering these incidents better prepares us for securing the future of this technology.

What do you think about some of the forgotten Bitcoin exchange hacks of the past? Let us know in the comments below.


Images courtesy of Shutterstock and Pixabay. 


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