Theft And Mayhem In The Bitcoin World

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The schadenfreude of Bitcoin enthusiasts over Ethereum’s recent troubles ended abruptly last week. A major Bitcoin exchange, Bitfinex, was hacked and nearly 120,000 BTC (around $60m) was stolen. The price of Bitcoin promptly crashed, and Bitfinex was forced to suspend trading. Suddenly, Ethereum was not the only basket case cryptocurrency around.

It appears that Bitfinex’s security was seriously compromised. Customer coins were held in individual wallets secured with a 2 of 3 multisig arrangement: keys were held by Bitfinex itself and Bitgo, a professional custodian and signatory, with a third (backup) key held in secure offline storage. Customers could not withdraw funds from the wallets until any borrowings had been cleared. It was, if you like, a form of escrow.  And it should have been secure.

But it wasn’t. Somehow, the hacker managed to gain access to hundreds of customer wallets. Not only did the hacker gain access to the wallets, he/she also overrode Bitgo’s withdrawal limits. It was a well-planned and comprehensive security breach by someone who knew exactly what they were doing. Funds were moved to thousands of addresses over a short period of time. Bitfinex, it seems, was powerless to stop it.

This is one of the largest Bitcoin heists ever, dwarfed only by Mt. Gox in 2014. It is comparable in size to Ethereum’s DAO theft only a couple of weeks ago. And it is going to result in a lot of people losing a lot of money. All of Bitfinex’s customers, in fact. The company has announced a haircut of 36.067% across the board:

After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets. This is the closest approximation to what would happen in a liquidation context. Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067%. In a later announcement we will explain in full detail the methodology used to compute these losses.

Although the loss is estimated as the amount the customers would receive if the company were liquidated, this is a bail-in. Bitfinex has no plans to cease trading:

We intend to come online within 24-48 hours with limited platform functionality. Additional announcements will be made as we progressively enable more platform features and return to full operations.

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This is just an introduction to what will happen later
 
nbtrading:
This is just an introduction to what will happen later
 Do you think traders may withdraw his/her profit on daily and or session bases and safe in pocket (country bank) rather than to transfer traders individual wallet at broker behalf.
 
mntiwana:
 Do you think traders may withdraw his/her profit on daily and or session bases and safe in pocket (country bank) rather than to transfer traders individual wallet at broker behalf.
Nothing related to bitcoin is safe. The whole thing is a money laundering scheme and should be treated as such
 

Theft? What theft? According to one Miami judge this wouldn't be considered theft because she ruled that Bitcoin isn't money as it's not “backed by anything” and is “certainly not tangible wealth and cannot be hidden under a mattress like cash and gold bars”, transactions of Bitcoin cannot be considered transaction of money and financial laws don't apply to them. Sometimes human ignorance astounds me. Let's hope this crime wouldn't be investigated by people holding similar views.

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