CAVIRTEX shutting down following security issues

Canadian Bitcoin exchange CAVIRTEX announced Tuesday that it is ceasing operations next month following a possible security breach.

The Calgary-based company will cease trading on March 20 and stop processing withdrawals on March 25, reported the Georgia Straight.

CAVIRTEX said that on Sunday, “we found reason to believe that an older version of our database, including 2FA secrets and hashed passwords, may have been compromised.”

The company said that “because security and the safety of customer funds are paramount to our mission and the success of Bitcoin in general, CAVIRTEX has determined to cease active operations in the Bitcoin business and to return all customer funds. We believe that the damage to the company’s reputation caused by the potential compromise will significantly harm our ability to continue to operate successfully.”

Speaking with CoinDesk, CAVIRTEX VP Kyle Kemper said the exchange has been the target of attackers for some time, and noted that given the exchange’s ongoing security risks, customer balance are at risk of being stolen.

“[The closure] has entirely to do with the fact that some of our databases were compromised,” said Kemper. “And, given the history of hackers against us, you know, it seems to be kind of never ending. We never lost any client funds but it’s getting to the point where it could happen.”

Kemper told CoinDesk that customers have been advised to revise account information on CAVIRTEX’s website, as well as re-input withdrawal balances. The company has also asked users to clear all site cookies as well.

CoinDesk also reported that other factors behind the exchange’s closure include ongoing problems with its banking partner. The costs of doing business with the bank proved challenging in the long-term.

“It was just a difficult time for us,” said Kemper. “As opposed to being viewed as a valuable client partner with them, and having a good relationship with your bank, it was more a role where they were just trying to get as much out of us as they could.”

In a follow-up statement to CoinDesk regarding banking issues, CAVIRTEX said, “Due to the regulatory uncertainty towards bitcoin, attaining banking services is a huge challenge. Given our line of business, the risk profile of a bitcoin exchange is considered high. In speaking with banks, what is truly desired is some clarification from the government and regulators on bitcoin’s legality, taxability, and usability. This would go a long way in helping bitcoin companies get banking solutions.”

With respect to shareholders, Kemper said CAVIRTEX is “operating with shareholders in mind,” but suggested share value could be affected as the exchange moves to close. He said the exchange plans to first pay out customer balances before addressing shareholder value.

Images via CAVIRTEX’s media kit