Another Bitcoin Startup Tanks After $600,000 Theft

[jsr]

http://www.forbes.com/sites/andygreenberg/2014/03/04/another-bitcoin-startup-tanks-after-600000-theft/

Another Bitcoin Startup Tanks After $600,000 Theft
Andy Greenberg

Mt. Gox may have become the biggest business to collapse within the Bitcoin economy when it declared bankruptcy last week after a massive theft of its coins. But it won’t be the last.

On Monday night Bitcoin startup Flexcoin announced that it would be shutting down following the theft of 896 bitcoins from its servers, worth close to $620,000 at current exchange rates. “On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet,” a note posted to the company’s website reads, referring to the portion of its coins that were in active use and so more vulnerable to theft. “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.” The company is working to coordinate a return of the bitcoins it kept in “cold storage”–a more secure but less liquid stash of its digital currency–to users who can claim them.

Flexcoin, which launched in the summer of 2011, acted as a cloud service for sending, receiving, and storing bitcoins, calling itself “the world’s first bitcoin bank.” Just days before its shutdown notice, it reassured users that it hadn’t lost any coins in the collapse of Mt. Gox, the first and once-largest Bitcoin exchange that declared bankruptcy last week after 850,000 of its bitcoins were stolen by hackers, 750,000 of which belonged to users. “We hold zero coins in other companies, exchanges etc.,” read a note on the company’s twitter feed. “While the MtGox closure is unfortunate, we at Flexcoin have not lost anything.”

The theft that shut down Flexcoin represents a tiny loss compared with Mt. Gox’s half-billion-dollar plus debacle. But it’s yet another reminder that the digital cash Bitcoin represents can be as irreversibly stolen as any cash, and its lack of regulation leaves users with little recourse when their accounts are emptied. Most Bitcoin security experts recommend users store the private keys that allow the spending of bitcoins on their own hard drive, or better yet a cold-storage hardware wallet. When it comes to more convenient web-based services whose security is out of users’ direct control, bitcoiner beware.

[arcane1]

1. Potentially stupid question: could they have hacked themselves? How traceable is this?

[dixiegrrrrl]

3. Theoretically,bit/virtual coins are supposed to be traceable.

But seeing as how the last person to hold them was the one claiming robbery....the trace ends there.

[Blue_Tires]

2. This is starting to get serious...