Cryptocurrency Exchanges hacks
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Reports show that cyber-attacks occur every 39 seconds, meaning that everyone will experience a hacking attack in their offices or at home at least once in their lifetime. This brings us to the topic of Cryptocurrency. Although the exchange of cryptocurrencies online is generally safe, you cannot remove the possibility of hacks because, in the real sense, nothing connected to the internet is 100% hack proof.
Cryptocurrency can be stored in a hot wallet (online) or cold wallet (offline). It is advised that you only keep only a little bit of Bitcoin in your hot wallet and only at the time you need it to trade rather than storing all of it. Bitcoin stored in hot wallets are vulnerable to hacks. Here in this article, you will learn about all the significant hacked cryptocurrency exchanges throughout the history of crypto.
Crypto exchanges Hacks
If the amount of Bitcoins stolen from under the care of hacked crypto exchanges is calculated, it would total over a million BTC, which is about 15 billion in dollars today. If that were stolen by a single individual, he or she would be amongst the top 100 richest people alive, that is until he or she is apprehended. So far the blockchain is neither regulated nor can it be insured, an individual that loses his or her bitcoin to hacking or through the loss of the personal private key should know that it cannot be gotten back.
The blockchain technology developed by Satoshi Nakamoto is secure. It exists as a shared database, available to the public and not centralized, making it impossible for hackers to corrupt. If there is an issue of vulnerability in an individual’s cryptocurrency, it is usually due to human error in the sense that the individual could have accidentally deleted the wallet file where bitcoin is stored or the individual lost the wallet files or the wallet file got stolen or hacked while online performing transactions.
The phenomenon of bitcoin hacking can be greatly reduced by making sure to follow bitcoin safe practices. But as the saying goes “to err is human”; that is at one point or the other, human errors occur which means bitcoin hacks cannot be 100% eradicated.
The following are some of the documented hacked exchanges:
Silk Road Hack
Back in the days, what the Silk Road only stood for was an ancient network of trade routes that linked the world of commerce from the east to the west. Nowadays, the Silk Road was a dark web network that serves as a platform responsible for the trading of illegal drugs. Silk Road accepted all kinds of currencies including the bitcoin.
In October of 2013, the FBI shut down the site and all of the bitcoin stored on the site was seized. Also in February of 2014, the re-launched site was allegedly hacked by one of its sellers that found a loophole in the security and kept withdrawing bitcoin till it was empty. Over 2.6million dollars’ worth of bitcoins were believed to be stolen. This is as a result of the site storing all of their Bitcoins online instead of offline for security. The hackers were not found.
Mt. Gox Exchange Hack
In the history of hacked bitcoin exchanges, this is the largest recorded loss of bitcoin. In June 2011, 8.75 million dollars’ worth of bitcoin was stolen by hackers. Then came March of 2014 where Mtgox admitted and declared bankrupt after going through another hack.
This was as a result of highly technical hackers that saw various vulnerabilities in the security system of the website. The hackers drained money from the crypto wallets bit by bit which spanned years. This was owing to the inexperience and attitude of the CEO to the day to day activities of the organization. Over 850,000 Bitcoins equivalent to about $473 million dollars were lost and the money non-refundable to customers. The anonymous hackers were never found.
In July of 2014, the founder of the cryptocurrency network “Paul Vernon” announced that the network had been hacked. This was done by an attacker who put a Trojan code into Cryptsy’s code so as to gain access to privileged information. Doing that enabled the hacker who was famous for developing lucky 7 coin to transfer cryptocurrency such as bitcoin and Litecoin out of the company’s wallet. The hack was only announced after a year as users kept on depositing money into their accounts but found out that they could not withdraw the money. This led to the United States court investigating cryptsy for keeping information from customers and holding their money hostage. This hack cost the digital currency exchange about 13,000 bitcoin and 300,000 Litecoin amounting to about 9.5 million dollars. The hacker has since not been found.
In July 2014, Mintpal released a report that it had lost a high amount of a cryptocurrency called vericoin as a result of a hack. The digital network was then taken over by Ryan Kennedy, then CEO of Moolah with a promise to tighten security in the network. The initial launch of the supposedly improved network gave users the problem of not being able to access their accounts.
Under a week, the site shut down and the company bankrupt with claims of its bitcoins being hacked. It was gathered that the same Bitcoins were being sold by Kennedy on a different website which led to legal action being taken against him. Bitcoin worth 3.2 million dollars were lost but this time, the perpetrator was arrested.
In January 2015, hackers targeted six staffs of Bitstamp for a week, by sending virus containing files to each staff so as to gain access to Bitstamp’s network. Electronic mail and Skype were used to contact the employees and files that piqued their personal interests were sent to each staff.
The system administrator “lukakodric” downloaded a file that he thought was from an external organization that wants his membership. This file when opened accesses both the wallet.dat file and its passphrase, giving the hackers access to the company’s hot wallet thereby emptying the bitcoin account.
19,000 bitcoins equivalent to 5.1 million dollars were stolen at the exchange. The company lost a significant amount of customers and had to build an entirely new network instead of rebooting to tighten security. It was gathered that there were plans to make arrests in the future by luring the hackers into a trap but the hackers were never found.
Chinese Bitcoin exchange Bter, was first hacked in August 2014 where an estimate of 50 million NXT coins equivalent to 1.71 million dollars at the time was stolen. Most of the funds were recovered. Then came February of 2015 where over 7000 BTC equivalent to 1.75 million dollars was stolen.
The Bitcoins were stolen from the company’s cold wallet which was a first of its kind. The details of how that happened were not released as speculations could only say it was an inside job. All wallets were shut down and withdrawals were put on hold. A bounty of 720BTC was offered to whoever could help in tracing the source of the hack as the hacker could not be traced.
This is a prominent cryptocurrency trading platform. On this platform, users can exchange several cryptocurrencies including Litecoin, Ethereum, bitcoin and others. BitFinex has a multi-signature wallet technology as a result of partnering with BitGo. Three sets of keys are used in the process, two managed by Bitfinex- one offline, one online and the third by BitGo.
For each customer, the keys are divided among a number of owners to minimize risk but this still could not prevent them from losing 120,000 units of BTC which is equivalent to about 72 million dollars at the exchange rate at that time. The hack happened in August 2016 and the hackers were never found. BitFinex issued out a token to the customers that were hacked with the promise of buying them back at a later date. What is impressive is that they are still in business and are running fine.
Nice Hash hack
The company NiceHash is a mining company with about 250,000 miners and was hacked in December 2017. NiceHash CEO Kobal Marko explained that the company was hacked through a company’s computer that was already compromised. It was later discovered from the VPN logs that the hackers used one of the engineer’s credentials.
The hackers understood and simulated the company payout system and started to make transactions, the CEO added that it was a very planned and detailed attack. About 4,000 BTC which is equivalent to 60 million dollars at the exchange rate at that time was stolen from the company. Kobal said that a law enforcement and a cybercrime specialist has been contacted. There have been no reports of the hackers apprehended.
Coincheck is the largest hack in the history of bitcoin hacking which took place in January of 2018. This cryptocurrency exchange is based in Tokyo and deals with bitcoin and NEM coins. The bitcoins were secure being stored in a cold wallet, but due to technical difficulties and staff shortage, the NEM coins were stored in a hot wallet instead of a cold wallet.
This led to the hacking of about 523 million NEM coins sent from a NEM address at the digital network. This is equivalent to 534.8 million dollars as BEM coins were trading just a bit over a dollar at the time. It was gathered that the hackers were traced but reports of an apprehension were never heard
Bitgrail Nano Hack
Sometimes it is not the big figures stolen that draw headline news, it is the story that unfolds after the incidence. This was a hack that happened in February of 2018. Bitgrail digital network makes use of a relatively new cryptocurrency, Nano formerly known as Raiblocks, that does not make use of the traditional blockchain, instead, it uses the block lattice architecture.
It was not adopted until it was generally accepted, it’s a centralized network and users were basically trading on an insecure network. This network, based in Italy claimed to have been hacked off about 17 million Nano which is equivalent to about 190 million dollars.
As to who caused the hack, it was reported by Francesco Firano but later on, there was an argument between the Nano development team and Francesco Firano on who caused the hack. It was later reported by the Nano development team that Firano had suggested to them to modify the ledger in order to cover missing funds from the BitGrail wallet.
The company was hacked in April 2018. The company’s CEO, Mohit Kalra, said that the chief security officer of the company, Amitabh Saxena, had a hand in the theft because he was the only one with the private keys to company’s main wallet. Again, Mohit observed that the company’s losses occurred when the security officer was extracting Gold for distributing to cryptocurrency customers.
The company’s CEO reiterated that it looked like a crime well planned out because private keys should have never been exported online. About 438 BTC which is an equivalent of 3.3 million dollars as at the time of the hack was lost.
The company CEO has already relayed all the necessary information and suspicion he has about the crime to the Delhi Police’s Cyber Cell and has contacted a specialist to find the source of the hack and trace it. Just like most of the hacks, the hackers have not been found.
In a Nutshell
We are sure you had a great time enjoying and at the same time learning while you were reading about the big hacks in the cryptocurrency world. As you can see, it is safe to say storing your cryptocurrency in a cold wallet is hack proof unlike storing it online in a hot wallet.
Centralized networks of cryptocurrencies are prone to corruption and hack so you should only trade in a reputable digital cryptocurrency network. Bitcoin safe practices should be employed by individuals and organizations participating in crypto trading because virtually all hacks happened as a result of human errors.
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