cryptsy

Cryptsy bitcoin exchange announces massive theft and shuts down indefinitely

Troubled bitcoin and altcoin exchange Cryptsy made an announcement overnight that may have shocked many, or maybe not because of all the problems they have been having for over the past year.

The announcement came with a few surprising pieces of information though. Cryptsy which is an exchange based in the US has been operating since 2013, but for the past year had had a number of customer complaints about issues withdrawing funds, and Cryptsy has had several mini-announcements along the way where they would often times “pause” wallets on their exchange while they “investigate.”

13,000 BTC stolen

According to the Cryptsy announcement post (archived), a year ago they found out that one of the altcoins that they supported had malicious code in it’s source which backdoored the exchange, and was able to run the code on the exchange platform and steal 13,000 bitcoins (BTC) and 300,000 litecoins (LTC). Suffice to say, this was a huge impact to the exchange, which has been operating on fractional reserves ever since; which by the way is essentially a ponzi and exactly what Mt.Gox was doing before they collapsed as well. If we have learned one thing in the bitcoin community since the Mt.Gox debacle, it’s how to spot an exchange that is ready to collapse, and Cryptsy has shown signs of a collapse for many months now.

What’s next

Cryptsy has stated that they plan to keep the exchange online, but everything including all withdrawals will be “paused” until they can make their users whole again, which for bitcoin users is a net loss of 13,000 BTC. Unless the hacker returns the bitcoins or someone identifies the hacker, it’s highly unlikely that Cryptsy will ever be operational again. Cryptsy also said in their announcement that they have a couple of options outside of the hacker returning the funds, which both are bleak for bitcoin users who have funds on the exchange.

1. We shut down the website and file bankruptcy, letting users file claims via the bankruptcy process and letting the court make the disbursements.

– or –

2. Somebody else comes in to purchase and run Cryptsy while also making good on requested withdrawals.

Being that Cryptsy is no longer operational, and there are no signs that they ever will be again, we have archived their bitcoin exchange listing on BitcoinX. For users that stopped using Cryptsy prior to their announcement today, there are many other more reputable bitcoin exchanges on the market to use. For users that have funds stuck on Cryptsy, it sounds like you may have a long road ahead of you, just like Mt.Gox users who have been trying to get back their funds for two years now.

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david@bitcoin.com'
David is a writer, researcher, and developer who is passionate about bitcoin and blockchain. He writes for Bitcoin.com, Blockchain.com, and is the founder of Bitcoinx.io (which was acquired by Bitcoin.com). David previously used to write and curate for Myspace and has worked in the fintech and payments space for over 15 years.