A bitcoin bank has been forced to close after hackers stole 896 bitcoin, worth £365,000, in an attack on Sunday.
The company shut its website and posted a statement on Tuesday morning detailing the loss.
“On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet,” the statement read. “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.”
Not all of the company’s assets were stolen. In line with best practices for running a bitcoin financial service, Flexcoin held some bitcoins in “cold storage”, keeping them on devices not connected to the internet. Those bitcoins are safe, but only users who explicitly requested their bitcoins be held in cold storage (and paid a 0.5% fee) benefit.
“Users who put their coins into cold storage will be contacted by Flexcoin and asked to verify their identity,” the statement continues. “Once identified, cold storage coins will be transferred out free of charge. Cold storage coins were held offline and not within reach of the attacker. Flexcoin will attempt to work with law enforcement to trace the source of the hack.”
Flexcoin attempted to impose a more conventional banking system over the top of the bitcoin network, enabling instant free transfers between Flexcoin customers while still allowing them to spend money in the wider bitcoin community.
Just six days ago, the company was boasting that it was unscathed by the closure of MtGox, once the world’s largest bitcoin exchange:
Flexcoin’s closure reinforces the problem the bitcoin community has with security.
The same day the company came clean about its losses, a second bitcoin firm, Poloniex, also admitted that 12.3% of its reserves had been stolen by hackers. Poloniex is a bitcoin exchange, and the company has committed to operating at a fractional reserve until it can replenish the losses itself.
“I sincerely apologize for this,” Poloniex’s owner wrote in a statement, “and I am very grateful to the many people who have already expressed their support and belief in my character. I take full responsibility; I will be donating some of my own money, and I will not be taking profit before the debt is paid.”
Flexcoin’s closure follows that of MtGox’s, blamed on hackers stealing 750,000 bitcoins by exploiting a bug known as “transaction malleability”. Several other bitcoin businesses, both high- and low-profile, have gone under. Services including Bitcoinica, Inputs.io and MyBitcoin have all been hacked, each losing thousands of bitcoins.
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image: © Zach Copley