Bitstamp suspends services after losing $5 million in BTC in breach

On Monday, Bitstamp, a Slovenia-based Bitcoin exchange, announced on its website that it would temporarily suspend services, stating that it had believed that one of its operation wallets was compromised on Sunday.

Bitstamp elaborated on the issue Tuesday, stating on its site that some of its operational wallets were compromised, resulting of a loss of less than 19,000 BTC, which, according to several media outlets, are worth around $5 million.

TIME magazine reported that hackers were only able to access a small portion of Bitstamp’s entire assets. While some coins are stored online, many more are stored on local hard drives, known as “cold storage.”

Bitstamp stated on its website that it is investigating the incident and working with law enforcement officials, adding that “we would like to reassure all Bitstamp customers that their balances held prior to our temporary suspension of services will not be affected and will be honored in full.”

Reuters reported that Bitstamp announced Wednesday it is expected to resume trading within 24 hours. In an email to the news agency, Damijan Merlak, a Bitstamp founder, said, “In the future we will strengthen security measures while the most important thing for clients is that they will suffer no financial damage as that will be covered by our company.”

In an article on the breach, USA Today reported that experts say Bitcoin, and Bitstamp, can survive the breach should the damages be contained, which the company has promised to be the case.

“They [Bitstamp] got hit but it looks like they will be able to survive the hit,” said Modern Money Group founder Steve Lord to USA Today. “I would never characterize this as immaterial, but I certainly don’t think it’s the death knell you are reading about.”

Meanwhile, the New York Times said in its report about Bitstamp that “the breach provided a stark reminder that the Bitcoin industry is still grappling with its image as a plaything of hackers and ne’er-do-wells intent on exploiting the digital currency and the places where it is traded and stored.”

In an email to the Times, Gil Luria, an analyst with Wedbush Securities, said, “Bitstamp has become a key part of Bitcoin ecosystem as one of the most trusted and liquid exchanges,” adding, “Many market participants have accounts at Bitstamp and rely on its listed prices for their operations. The issues at Bitstamp are hampering activity for the Bitcoin market as it works through these issues.”

Luria further added, “I believe this is yet another sign of the need for regulated, secure, liquid US-based exchanges to create a more robust infrastructure trading.”

In their reports on Bitstamp and its breach, several news outlets made reference to last year’s collapse of the Tokyo-based Mt. Gox exchange, which had lost more than $450 million worth of BTC and then filed for bankruptcy.

The Times said that while Bitstamp is far from the largest Bitcoin exchange (according to Bitcoin charts, Bitstamp represents 6 percent of Bitcoin transactions), Reddit users posted a slew of warnings Monday that Bitstamp was down and speculated the reason was theft. One Redditor posted that he had foreseen issues at Bitstamp five months ago, writing that “I have nightmares of Mt. Gox all over again.”