Mike Shedlock

Two more bitcoin exchanges were robbed in the past few days. "Flexcoin" lost all online coins and shut its doors.

Flexcoin admitted it did not have resources to cover 896 stolen bitcoins, worth £365,000 (about $608,200). Bitcoins in Flexcoin's "cold storage" (offline), for which depositors have to pay a fee, were not affected.

"Poloniex", the other hacked bitcoin site, admitted that it is missing 12.3% of its assets because of a flaw in its transaction system. Its owner apologized and will keep its exchange running.

The Guardian reports Bitcoin Bank Flexcoin Closes After Hack Attack.

Flexcoin has been forced to close after hackers stole 896 bitcoins, worth £365,000, in an attack on Sunday. The company shut its website and posted a statement on Tuesday morning detailing the loss.

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

Not all of the company’s assets were stolen. In line with best practices for running a bitcoin financial service, Flexcoin held some bitcoins in “cold storage”, keeping them on devices not connected to the internet. Those bitcoins are safe, but only users who explicitly requested their bitcoins be held in cold storage (and paid a 0.5% fee) benefit.

“Users who put their coins into cold storage will be contacted by Flexcoin and asked to verify their identity,” the statement continues. “Once identified, cold storage coins will be transferred out free of charge. Cold storage coins were held offline and not within reach of the attacker. Flexcoin will attempt to work with law enforcement to trace the source of the hack.”

Just six days ago, the company was boasting that it was unscathed by the closure of MtGox, once the world’s largest bitcoin exchange:



The same day the company came clean about its losses, a second bitcoin firm, Poloniex, also admitted that 12.3% of its reserves had been stolen by hackers. Poloniex is a bitcoin exchange, and the company has committed to operating at a fractional reserve until it can replenish the losses itself.

Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.
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