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Bitcoin Plunges after Bitfinex Exchange in Hong Kong Hacked | ASHARQ AL-AWSAT English Archive 2005 -2017
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A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, May 27, 2015. REUTERS/Benoit Tessier/File Photo

Approximately 120,000 units of bitcoin worth nearly US$72 million was stolen from the digital currency exchange platform Bitfinex on Tuesday. The 120,000 units amount to about 0.75 percent of all bitcoin in circulation.

The price of bitcoin dropped over 20 percent on Tuesday from $604 to $482 after the Hong-Kong based company suffered the hack. On Wednesday they had recovered to $545.20 (1 percent).

Bitfinex is the largest dollar-based exchange and third-largest globally after BTC China and OKCoin.

The company froze all customer transactions and suspended trading on Tuesday while the security breach is investigated.

“We are investigating the breach to determine what happened, but we know that some of our users have had their bitcoins stolen. We are undertaking a review to determine which users have been affected by the breach,” said Bitfinex in a statement on its website.

Zane Tackett, Director of Community and Product Development for Bitfinex said on Wednesday: “The bitcoin was stolen from users’ segregated wallets.”

He added that the security breach did not “expose any weaknesses in the security of a blockchain”, the technology that generates and processes bitcoin. It is a virtual currency operating independently of a central bank and can be accessed anonymously across the globe.

Antony Lewis, a bitcoin expert in Singapore, said: “It’s the biggest USD exchange, so outside China it’s the one that everyone has an account with. It’s very liquid, folk can trade on margin, lots of daily volume.”

It is not yet clear whether hackers were able to gain access to the system externally or whether the theft was an inside job.

Bitcoin businesses said the hack was likely to damage confidence, but not to a detrimental extent.
“This will hurt confidence but people already using bitcoin are still trading,” said Arthur Hayes, founder of Hong Kong-based BitMEX.

The hack on Bitfinex was the second-largest security breach ever in Bitcoin’s history and is being treated as a big deal in the virtual currency community.

“Unfortunately, we continue to have vulnerabilities in the form of exchanges and wallets,” former Singapore-based bitcoin broker David Moskowitz said to the BBC.

“The vulnerabilities almost always occur on the exchange or wallet side and this is an area that continues to need improvement and more secure protocols, no different than when a bank gets robbed.”

A similar cyber-attack on MtGox, a Tokyo-based bitcoin exchange, forced the company into bankruptcy protection in 2014 and led to the arrest of its chief executive Mark Karpeles in Japan.
It is unknown whether the theft will also force Bitfinex to declare bankruptcy.
MtGox never reopened after the company was closed in February 2014, having had 850,000 coins worth almost $500 million stolen.

Jack Liu, chief strategy officer at OKCoin said: “MtGox had a far bigger effect than this will. Now we have far more cases for using bitcoin than we did then, people will still find it attractive to come back to this space and grow the ecosystem…This could speed up some of the other improvements that are on the way for scaling bitcoin.”