Hacked Gatecoin Raises $500K to Reopen Exchange

Hacked Gatecoin Raises $500K to Reopen Exchange

Hong Kong-based exchange Gatecoin, which suffered a major theft in May, has raised $500,000 from a listed Japanese investment company to aid in its recovery and reopening.

Also read: Ethereum Is Not a Government, It Is a DAO

Gatecoin in Recovery, Fires CTO

Aurelien Menant
Aurelien Menant

Gatecoin (gatecoin.com) plans to reopen for regular business in August. The trading platform has been suspended since the second week of May, when a breach saw 250 BTC and 185,000 ETH removed from its wallets. At the time, the total value of the theft was $2 million, and represented 15% of the company’s crypto asset deposits.

Customers can log into their accounts and those wishing to withdraw BTC amounts have been able to do so since May.

In another update, the company has fired its CTO and hired a replacement with an extensive background in systems security.

Speaking to Bitcoin.com, Gatecoin CEO Aurélien Menant provided some interesting details on the situation:

Firstly, once it became clear that the system breach was in large part due to his negligence and failure to uphold his responsibilities as a CTO, there was no question about terminating his employment. Secondly, as a potential suspect in the breach, we could not risk keeping him on. The criminal investigation is still ongoing and hopefully we will have some further details to share in due time.

Neither the replacement CTO nor the name of the Japanese investor has been revealed yet.

Customers to Be Made Whole

Gatecoin-Suffers-a-2-Million-Crypto-Asset-LossIn a statement mailed to account holders, Gatecoin said it is “optimistic about the prospect of attracting a network of co-investors to pledge additional amounts, which will only be used to reimburse clients’ ETH.”

A cooperation with multi-crypto exchange Poloniex has already seen the recovery of 5,000 ETH. Although Poloniex had offered to help Gatecoin out for free, the company insisted on paying a promised 25% bounty to anyone with useful information – after customers have been made whole.

The $500K investment will be used to bolster the security infrastructure of the exchange and keep the company operating while management negotiates ways to replace missing funds. As well as a new CTO, Gatecoin will hire additional engineering talent with experience in secure financial systems.

Transparency

Gatecoin has been transparent about the breach and its recovery process from the very beginning, providing detailed updates. Management has stated repeatedly its intention to reimburse all customers.

“We believe that transparent communications are essential to maintain good relationships with our clients and the community,” Menant said, adding:

When customers’ funds are at stake, it’s important that we provide as much information as possible to avoid speculation and concern. We will continue to update our clients at each stage of the recovery process.

Gatecoin’s statement said management understands frustrations among clients, who have been patient until a time can be announced when ETH withdrawals are possible again.

Gatecoin continues to work with the Cyber Security and Technology Crime Bureau of the Hong Kong Police Force to investigate the breach, which is likely to continue for several more months.

Other Fundraising Options

Gatecoin is “negotiating with several clients on the terms and procedures of USD multi-million block trades,” in order to secure enough ETH to reimburse its customers.

It had initially proposed a debenture, which “had very little interest from potential investors.” As a result, the company is also open to other proposals from the community as to other solutions.

The recovery effort may be made slightly easier by the recent slump in the price of ether. At the time of the hack, it was worth just over $10, similar to the price today ($10.22 at press time).

It had topped $20 just three weeks ago, right before an exploit in ethereum based project The DAO saw over 3,000,000 ETH taken and ethereum’s price begin an extended decline.

Are you a Gatecoin customer? In your opinion, is the company’s response to the crisis setting a good example?


Image credit: Barry Chum, via Wikimedia Commonsenterpriseinnovation.net