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$72 Million Worth of Bitcoin Stolen From Bitfinex

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$72 Million Worth of Bitcoin Stolen From Bitfinex

Close to 120,000 units of virtual currency bitcoin worth about $72 million (£54 million) was robbed from the exchange platform Bitfinex in Hong Kong, rattling the global bitcoin community in the second-largest security infraction ever of such an exchange.  Bitfinex is the world’s largest dollar-based exchange for bitcoin, and is known in the virtual currency community for having deep liquidity in the U.S. dollar/bitcoin currency pair.  Zane Tackett, Director of Community & Product Development for Bitfinex, told Reuters  that 119,756 bitcoin had been robbed from client’s accounts and that the exchange had not yet decided how to address customer deficits.

The company said it had reported the theft to law enforcement and was cooperating with top blockchain analytic companies to track the stolen coins.  Last year, Bitfinex announced a tie-up with Palo Alto-based BitGo, which uses multiple-signature security to store user deposits online, allowing for faster withdrawals.  The security breach comes two months after Bitfinex was ordered to pay a $75,000 fine by the U.S. Commodity and Futures Trading Commission in part for offering illegal off-exchange financed commodity transactions in bitcoin and other digital currencies.

Bitcoin plunged just over 23 percent on the following Tuesday after the news broke. On Wednesday it was up 1 percent at $545.20 <BTC=BTSP> on the BitStamp platform.  Tackett added that the breach did not expose any weaknesses in the security of a blockchain, the technology that generates and processes bitcoin, a web-based crypto currency that can move across the world anonymously without the need for a central authority.  A bitcoin expert said the scandal highlighted the risks of companies using cryptography for their ledgers.  The volume of bitcoin stolen amounts to about 0.75 percent of all bitcoin in circulation.  It is not yet clear whether the theft was an inside job or whether hackers were able to gain access to the system externally.  Bitfinex suspended trading on Tuesday after it discovered the breach. It said on its website that it was investigating and cooperating with the authorities.  The security breach is the latest scandal to hit Hong Kong’s bitcoin market after MyCoin became embroiled in a scam last year that media estimated could have duped investors of up to $387 million. The bitcoin trading company closed after the public embarrassment.

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