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Compromised Bitcoin account leads to run on market

by Hugo Jobling on 20 June 2011, 22:27

Tags: General Business

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Market fluctuations

One of the largest Bitcoin exchanges - Mt.Gox is having to roll back thousands of transactions as a compromised account led to its exchange rate crashing from over $17/BTC to as little as $0.01/BTC.

According to Mt.Gox: "One account with a lot of coins was compromised and whoever stole it (using a HK based IP to login) first sold all the coins in there, to buy those again just after, and then tried to withdraw the coins. The $1000/day withdraw limit was active for this account and the hacker could only get out with $1000 worth of coins. Apart from this no account was compromised, and nothing was lost. Due to the large impact this had on the Bitcoin market, we will rollback every trade which happened since the big sale, and ensure this account is secure before opening access again."

Although the party making the attack was hit by the exchanges $1,000 withdrawal limit, and as such wasn't able to make off with a huge sum of money, despite the quality of compromised Bitcoins traded, the effect on the Bitcoin economy was pronounced. In total, an estimated $8.5 million worth of Bitcoin value was lost in the crash - even though Mt.Gox says only a relatively small proportion of the Bitcoins on its exchange were affected by the compromised account itself.

While the damage internal to Mt.Gox was fairly easily remedied within the exchange by rolling back the transactions, but other exchanges were affected by the crash, too, and customers who sold their Bitcoins outside of Mt.Gox are unlikely to find recourse. Whether this incident will have an effect on the larger Bitcoin economy remains to be seen, but as the digital currency starts to see increased use by less technically savvy buyers, the likelihood of further accounts being compromised can only increase.

HEXUS Forums :: 8 Comments

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I'm surprised more accounts were not used as part of the fraud - since I got this email this morning:

Our database has been compromised, including your email. We are working on a
quick resolution and to begin with, your password has been disabled as a
security measure (and you will need to reset it to login again on Mt.Gox).
Please accept our apologies for the troubles caused, and be certain we will do
everything we can to keep the funds entrusted with us as secure as possible.

The leaked data includes the following:

- Account number
- Account login
- Email address
- Encrypted password

Now to remember exactly which password I used for my account and to start changing it..for the second time this year now after the Sony Fiasco!
I'm confused.. what is Bitcoin? Some sort of internet currency that can be exchanged for cash?
i still don't understand why people pay cash for it, whole thing just seems loopy!
i still don't understand why people pay cash for it, whole thing just seems loopy!

Allegedly because it's an anonymous currency, with which it's easier to get hold of illicit material.

And some people probably made a fortune, buying at approx $7 and selling at $30.

I wouldn't, but I can see why people have done and will do.