Hack Attack Forces Bitcoin Bank to Close Down Shop

Bitcoin Bank Closes After Hacked

After a hack attack this past Sunady, bitcoin bank Flexcoin was forced to close its doors. Hackers stole 896 bitcoins, worth £365,000.

On Tuesday morning, the company shut down its website and posted the following statement:

“On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.” 

Flexcoin hadn’t lost all of its assets, as some of its bitcoins were held in ‘cold storage’. The preserved assets were kept on devices that did not require internet connectivity.

Users whose bitcoins were kept in cold storage had to pay a 0.5% fee. With all of the recent virtual attacks on bitcoin, cold storage was wisely implemented.

The company’s statement mentions how cold storage users will be contacted by the bitcoin bank to verify their identities. Following the verification process, Flexcoin will transfer the bitcoins to owners free of charge, and rightfully so. They added:

“Flexcoin will attempt to work with law enforcement to trace the source of the hack.”

Flexcoin made an attempt to use an ordinary banking system through the bitcoin network. This would allow for free transfers between the bank and its customers, while allowing them to use their bitcoins within the bitcoin community.

Just last week, Flexcoin was bragging about how they went unscathed from the bitcoin barrages that slayed Mt Gox. The bank tweeted six days ago:

We hold zero coins in other companies, exchanges etc. While the MtGox closure is unfortunate, we at Flexcoin have not lost anything.

— flexcoin (@flexcoin) February 25, 2014

Hackers Plague the Bitcoin Community

It seems that the bitcoin company spoke to soon. Flexcoin, along with the rest of the bitcoin community has been bombarded by the hack attacks for almost a month. The attacks have caused the price of bitcoin to decline in value.

Most notably, the Mt Gox Japanese bitcoin exchange was hit hard, as more than 750,000 bitcoins were stolen off the company’s exchange. The Japanese exchange has filed for bankruptcy protection and has lost millions of dollars in bitcoin.

In addition to Flexcoin and Mt Gox, bitcoin exchange Poloniex admitted to losing 12.3% of its reserves due to hacker thefts. The exchange has begun operating at a fractional reserve until it can recover its loses. Poloniex’s owner wrote in a statement:

“I sincerely apologize for this, 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.”

Thousands of bitcoins have been stolen from bitcoin firms. Businesses Bitcoinmania, MyBitcoin and Inputs.io have all been attacked and robbed of bitcoins as well.

More secure measures must be taken to secure bitcoin. If bitcoin is the valuable commodity these businesses believe it to be, then it must be protected better. The bitcoin bug should not be allowed to stunt bitcoin’s growth.

Customers entrust bitcoin exchanges and banks to protect their investments, not lose them. The exchanges have to stop fooling around and secure the potential future of currency.

For more bitcoin news, stay tuned to Coinreport.net.

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