BitFloor exchange robbed of US$250,000, all trading halted

BitFloor exchange robbed of US$250,000, all trading halted

Summary: BitFloor has been robbed an amount equivalent of a quarter of a million US dollars, and has forced to halt all trading while it assesses whether it can recoup its losses and continue operating.

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The fourth largest BitCoin (BTC) exchange market BitFloor has temporarily ceased trading and shut down, following an attack that has seen over US$250,000 stolen from the pool of coins that the organisation uses to execute trades.

BitFloor founder Roman Shtylman announced earlier today on the Bitcoin Forum that the servers behind BitFloor had been hacked. Shytlman's account of the event reveals that, although the organisation encrypts the necessary wallet keys needed to conduct transactions, it also kept an unencrypted backup, which were most likely compromised by the attacker. Shtylman has not elaborated much further on the details of the attack, but has stated that the server that was compromised was not public facing.

The stolen keys were used to conduct four transactions of a total of 24,078.39 BTC. At the current exchange rate of 1 BTC to US$10.45, the total amount stolen is US$251,600. Bitcoin transactions are decentralised and do not have an inherent dispute resolution process built into their design. While this affords users with the ability to have a currency free of any government body, it also means that transactions are almost impossible to trace.

Shtylman said that the loss may result in BitFloor folding its operations; however, that would be a last resort measure. If he decides to take that option, Shytlman has said that he still has logs of all the accounts, trades and transfers, which will allow him to make account repayments to BitFloor customers using the exchange market's remaining funds.

However, Shtylman hopes to continue operating BitFloor and increase the organisation's transparency.

"Through exchange user support, I can continue to operate BitFloor. I believe that posting the exchange source and being even more transparent about operations would be a step in this direction, if we were to continue operating," he wrote in his post.

BitFloor currently takes 0.3 percent from each trade in fees, which earns it about 210 BTC per month. From these fees, it would take about four years and nine months for it to completely recover its loss, but Shtylman has had some interest from investors willing to help out, and it is an option he is considering.

While Shtylman brought the BitFloor website back up shortly after the attack, he quickly took it down again due to the confusion it was causing for users. Shtylman is now seeking legal advice on the exchange's financial situation. Shtylman had previously hoped to resume trading later this week.

BitFloor is not the first Bitcoin exchange market to fall victim to an attack. In June last year, the Mt.Gox exchange was compromised via a hacked administrator's account. Using this account, the attacker withdrew 2,000 BTC, after driving the then exchange price of US$17.50 down to US$0.01 in a 30 minute time span. Mt.Gox has since recovered, and accounted for the 2,000 BTC theft out of its own pocket.

Topics: Security, E-Commerce, Privacy

Michael Lee

About Michael Lee

A Sydney, Australia-based journalist, Michael Lee covers a gamut of news in the technology space including information security, state Government initiatives, and local startups.

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