Hackers Strip Flexcoin Almost Bare, Bitcoin Bank Closes

[Karloff]

Hackers Strip Flexcoin Almost Bare, Bitcoin Bank Closes

The self-proclaimed world's first bitcoin bank has been robbed of over $600,000.

When Tweet [http://www.escapistmagazine.com/news/view/132342-Mt-Gox-Files-Bankruptcy-as-Customers-Lose-Faith-in-Exchange-Update-3] that "while the Mt. Gox closure is unfortunate, we at Flexcoin have not lost anything." Perhaps it ought to have added "at least, not yet," since thanks to a massive robbery Flexcoin is no more. Its hot wallets have been cleaned out, and 896 Bitcoin stolen, valued at about $620,000. Flexcoin cannot afford the loss, and is shutting down effective immediately.

"Flexcoin has made every attempt to keep our servers as secure as possible, including regular testing. In our ~3 years of existence we have successfully repelled thousands of attacks. But in the end, this was simply not enough," said Flexcoin in a statement published via its website [http://flexcoin.com/]. "Having this be the demise of our small company, after the endless hours of work we've put in, was never our intent. We've failed our customers, our business, and ultimately the Bitcoin community."

Flexcoin has promised to restore any Bitcoin kept in its cold wallet, stored in computers that weren't connected to the internet. However everything in its hot wallet was vulnerable to what Flexcoin describes as "a flaw in the code" that allows transfer between Flexcoin customers. That flaw allowed someone to shove everything in the hot wallet into a couple of temporary web addresses, and then vanish.

Flexcoin isn't the only one to have suffered losses. Poloniex, a Bitcoin exchange, admits that approximately 12.3% of its Bitcoin reserves have been stolen by a hacker exploiting its withdrawals code. "The hacker discovered that if you place several withdrawals all in practically the same instant, they will get processed at more or less the same time," says a Poloniex representative [https://bitcointalk.org/index.php?topic=499580]. "This will result in a negative balance, but valid insertions into the database, which then get picked up by the withdrawal daemon."

Poloniex is solving its problem by deducting 12.3% from its remaining customers' balances. Poloniex's owner has promised to donate some of his own money and refuses to take any profit until the debt is paid.

Source: Guardian [http://www.theguardian.com/technology/2014/mar/04/bitcoin-bank-flexcoin-closes-after-hack-attack]

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[Link XL1]

It's a damn shame, but let's face it: with a digital currency just getting it's first bank, there are gonna be bank robbers, especially since there's a lot less risk in an attempt to rob a digital bank then a physical one since you don't have to actually BE at the bank

 

[Kmadden2004]

Well, so long Bitcoin, it was a fun experiment while it lasted...

 

[NuclearKangaroo]

It's a damn shame, but let's face it: with a digital currency just getting it's first bank, there are gonna be bank robbers, especially since there's a lot less risk in an attempt to rob a digital bank then a physical one since you don't have to actually BE at the bank

that is until the FBI knocks at your door


while im not convinced of this whole bitcoin idea, i say people shouldnt fret that much over this, is the begining of a new kind of tecnology or rather concept, flaws and exploits are to be expected and theres plenty of reasons to believe things will get better, instead of worse

 

[erbkaiser]

Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme. Unless you're one of the earliest adopters, you'll not get rich from Bitcoin. Only whoever "Satoshi Nakamoto" is and a few others stand to make money from this scheme.

 

[fix-the-spade]

that is until the FBI knocks at your door

Assuming the robber is within FBI jurisdiction and assuming they even care about theft of crypto currency. All the joy of internet banking, none of the legal protection, about time for Bitcoin to devalue.

 

[Baresark]

These digital bank robbers are becoming a real hassle. This is a problem with a digital currency... really a digital good of any kind.

 

[Zipa]

While it sucks that people have lost money it is not a bad thing in one way if it puts the nail in the coffin of this whole digital currency nonsense. Heck people might be able to buy AMD GPUs at reasonable prices again then.

 

[CriticalMiss]

that is until the FBI knocks at your door

Assuming the robber is within FBI jurisdiction and assuming they even care about theft of crypto currency. All the joy of internet banking, none of the legal protection, about time for Bitcoin to devalue.

Kim Dotcom would tell you that the FBI don't care much about jurisdiction these days.

Poloniex is solving its problem by deducting 12.3% from its remaining customers' balances. Poloniex's owner has promised to donate some of his own money and refuses to take any profit until the debt is paid.

So they are covering their losses by making the customers pick up the bill? How kind. If only they had used tax-payers money then they could be a real bank! At least the big cheese is throwing some money in as well and they aren't making a profit, but it seems unfair to pass their mistake on to their customers.

 

[fix-the-spade]

Kim Dotcom would tell you that the FBI don't care much about jurisdiction these days.

They still had to get the cooperation of the NZ authorities to go after Kimdotcom, if NZ had told them to sing to wind there's nothing they could have done about it.

 

[CpT_x_Killsteal]

Again, not to sound like a conspiracy theorist or anything, but the ones who stand to gain the most from the downfall digital currency are those who are rich and are using "state-issued" money. I don't think we've heard anything about who the perpetrators are have we? It's just been a really well organised blitzkrieg on Bitcoin value.

Sad for the people that lost their fake money

All money is essentially "fake". The value of, say, the US Dollar is only what people place in it. Well... what Wall St places in it.

 

[erbkaiser]

All money is essentially "fake". The value of, say, the US Dollar is only what people place in it. Well... what Wall St places in it.

The value of the dollar is protected by the trust you can place in the US Mint and by extension the USA as a nation.

The value of Bitcoin is "protected" by the trust you have in some obscure math designed by someone who is still anonymous, and who personally owns about 10% of all Bitcoins that will ever be possible. Some other early adopters hold an immense chunk of the theoretical maximum number of 21M as well, I believe the last guess was that up to 30% of all Bitcoins were "locked away" by unknown persons/groups/whatevers.

We don't know who Satoshi is, and if it is even a person or a group, nor what their goals are (beyond getting insanely rich).

This opens up the risk of manipulation of the Bitcoin by SN and others, including hyperinflation should they suddenly release a great number of Bitcouns.

Sure hyperinflation could and has happened to real currencies, but it is extremely unlikely to happen with currencies like the Dollar, Euro, Yen or any other developed nation's.

In comparison, Bitcoins are as trustworthy as North Korean Wons or Zimbabwean Dollars or even less so, since with currencies controlled by failed states we at least know who is behind them.

 

[Vivi22]

It's a damn shame, but let's face it: with a digital currency just getting it's first bank, there are gonna be bank robbers, especially since there's a lot less risk in an attempt to rob a digital bank then a physical one since you don't have to actually BE at the bank

that is until the FBI knocks at your door

Considering most things like the sale of credit card numbers and presumably hacks like this are committed by people outside of the US (Russian organized crime seems big on this stuff for example), there's zero risk the FBI will ever come after these guys. And the likelihood of governments like that in Russia giving a shit is probably close to nil as well.

 

[Vivi22]

The value of the dollar is protected by the trust you can place in the US Mint.

Not really. All money only has value because people believe it does and accept it as currency in trade. Lose that and the money becomes worthless. There is some level of trust people place in government currencies because they simply do, but the value of any money can't really be guaranteed by a government, and in the event currency devaluation starts spiraling out of control, it is very hard for them to defend against it.

There's nothing that makes the value of any government stable aside from belief that it's stable. Which is almost terrifying if you stop and think about it.

 

[Falterfire]

So it sounds like Poloniex died to a race condition. Which is interesting, because I was pretty sure most off-the-shelf database software is specifically designed to handle that sort of thing. At bare minimum, I know real banks are able to avoid this sort of thing when doing stuff online.

If Poloniex went down to something that simple, I really don't have any trust in them at all.

 

[Daaaah Whoosh]

As a novice programmer, I find it terrifying that these people's bugs are costing them hundreds of thousands of dollars. When I write buggy code, I usually just get a good laugh out of it.

 

[erbkaiser]

Not really. All money only has value because people believe it does and accept it as currency in trade. Lose that and the money becomes worthless. There is some level of trust people place in government currencies because they simply do, but the value of any money can't really be guaranteed by a government, and in the event currency devaluation starts spiraling out of control, it is very hard for them to defend against it.

There's nothing that makes the value of any government stable aside from belief that it's stable. Which is almost terrifying if you stop and think about it.

True, I meant it more in the sense of that the only one who can suddenly decide to print millions of new dollars is the US government, and it would be against the interests of the US itself to do so.

Bitcoin has no such protection. SN is an unknown, and if he/she/it/they decides tomorrow to release one million Bitcoins on the market, nobody can stop him/her/it/them.

 

[Lono Shrugged]

Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme. Unless you're one of the earliest adopters, you'll not get rich from Bitcoin. Only whoever "Satoshi Nakamoto" is and a few others stand to make money from this scheme.

Or not, considering a hacker can rob all your coins. Say what you will about banks. When they get robbed, at least they are not robbing from the customers accounts.

 

[m72_ar]

Again, not to sound like a conspiracy theorist or anything, but the ones who stand to gain the most from the downfall digital currency are those who are rich and are using "state-issued" money. I don't think we've heard anything about who the perpetrators are have we? It's just been a really well organised blitzkrieg on Bitcoin value.

Sad for the people that lost their fake money

All money is essentially "fake". The value of, say, the US Dollar is only what people place in it. Well... what Wall St places in it.

State owned currency are backed by the goods produced by that nation and their army.

Bitcoin is backed well by....... Wishful thinking

Sad for the people that lost their fake money, but then again Bitcoin is nothing but a clever ponzi scheme. Unless you're one of the earliest adopters, you'll not get rich from Bitcoin. Only whoever "Satoshi Nakamoto" is and a few others stand to make money from this scheme.

Or not, considering a hacker can rob all your coins. Say what you will about banks. When they get robbed, at least they are not robbing from the customers accounts.

Unless you live in Cyprus