UK-based Bitstamp, the second largest bitcoin exchange for US dollars, suspended operations on Monday, following evidence that online thieves had stolen up to 19,000 BTC—approximately $5.2 million—from its operational store of bitcoins.
The company alerted its users of the possible attack on Monday and warned against transferring any bitcoins to the service’s old bitcoin deposit addresses. Early the following morning, Bitstamp revealed that the attack affected fewer than 19,000 bitcoins. The actual attack appeared to have occurred on Sunday, January 4, when attackers compromised the company’s operational funds, also known as the “hot wallet."
“Thank you all for your patience, we are working diligently to restore service,” Nejc Kodrič, the co-founder and CEO of Bitstamp, tweeted on Monday, adding, “To restate: the bulk of our bitcoin are in cold storage, and remain completely safe.”
Bitstamp is the second major bitcoin exchange to claim an attack by hackers. Less than a year ago, the then-largest bitcoin exchange, Mt.Gox, suspended its service and shuttered its doors, claiming online thieves siphoned off more than 850,000 bitcoins—including 100,000 BTC of its own digital cash—worth approximately $470 million at the time. Japanese authorities now reportedly believe that 99 percent of the loss was due to fraudulent transactions, possibly by an insider, according to a report in the Japanese press last week.
The devastating Mt.Gox attack was presaged by a smaller attack. In June 2011, the site lost the equivalent of nearly $9 million in bitcoins to hackers, an amount similar to the estimated Bitstamp loss.
Bitstamp processed about a quarter of bitcoins transfers to and from US dollars. The conversion of bitcoins to Chinese Yuan, however, represents about three-quarters of all transactions in the last 30 days, according to BitcoinsChart.com.
Bitcoin users speculated on forums whether the Bitstamp incident would follow the same trajectory as Mt.Gox. For the most part, the outcome will depend on whether the company truly had only a “small fraction” of its bitcoin capital readily accessible in a hot wallet.
“A hot wallet is only supposed to have a small amount of BTC, enough that they can easily cover losses,” one user stated on the BitcoinTalk forum. “If it’s only the hot wallet and they were using the hot wallet correctly—IE only having a small amount of funds in it—then everything should be OK.”
On Monday, Bitstamp stressed that its operational funds constituted a minority of its overall stores and guaranteed that users would get their digital money back. Early Tuesday morning, the company also stated that the loss was limited to at most 19,000 BTC.
“This breach represents a small fraction of Bitstamp’s total bitcoin reserves, the overwhelming majority of which are held in secure offline cold storage systems,” the Tuesday statement on Bitstamp’s website pledged. “We would like to reassure all Bitstamp customers that their balances held prior to our temporary suspension of services will not be affected and will be honored in full.”
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