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Crypto Hacks: The Biggest Crypto Exchange Hacks in History

In the past years, countless cryptocurrency exchanges have suffered from massive attacks initiated by unknown hackers. These crypto exchange hacks caused great damages that led to losses, not only to the exchange but also to the users that invested in the platform.

As a result, the exchanges had to cover up the losses it suffered. With this in mind, insurance or personal investment funds come into play. Aside from going through this financial trouble, the exchange has to endure a bad reputation and loss of trust that could decrease the number of investors using the platform.

Below is the overview of the biggest crypto exchange hacks in the history of cryptocurrency exchanges:

Coincheck

Coincheck is one of the biggest cryptocurrency exchanges in Asia. Keisuke Wada and Yusuke Otsuka founded the exchange in 2012. Its headquarters is located in Tokyo, Japan. The platform accepts and extends its service to digital assets such as Bitcoin, Ethereum, Ripple, Dash, Monero, and many more.

On January 26, 2018, unknown hackers penetrated the Japanese crypto exchange. This crypto exchange hack has stolen 500,000,000 NEM tokens that is equivalent to $534.8 million at that time. The hackers stole NEM tokens stored on a hot wallet. This proves that this type of wallet is vulnerable to cyber-attacks.

A few days after the attack, the Tokyo-based exchange released a statement that it would provide reimbursement to all the users affected by the hack. As mentioned, all damages will be paid in Japanese yen and the computation will be based on the user’s last transaction before the hack.

In April 2018, the Monex group bought Coincheck. Under its influence, the exchange revised its management structure and improved the platform’s network and security.

Mt. Gox

In 2010, Mt. Gox was the world’s biggest crypto exchange. It previously held almost 70% of all bitcoin trades worldwide. American programmer Jed McCaleb founded this exchange. Later on, he became Ripple and Stellar’s co-founder.

The name Mt. Gox came from the trading card game “Magic: The Gathering Online Exchange”. At first, the platform was simply built to create an exchange for trading Magic card games. Accordingly, McCaleb converted the platform into a Bitcoin exchange.

The reason for changing the domain was simple: provide a single place to connect both Bitcoin buyers and sellers. This idea boosted the exchange’s reputation in the crypto space and made the exchange profitable. After a year in operation, McCaleb sold the exchange platform to Bitcoin enthusiast and co-programmer Mark Karpeles, also known as MagicalTux in online forums.

This is when it experienced its first crypto exchange hack. In 2011, Hong-Kong based hackers initiated massive dumping of Bitcoin from a compromised user account that led the Bitcoin price to fall instantly from $17 to almost zero in a matter of minutes. These hackers also obtained 60,000 data accounts from Mt. Gox users.

On February 24, 2014, the exchange was hacked for the second time. This time, the exchange stopped all its trading activities and its website globally went offline. A few days later, a document leak revealed that the exchange lost 744,408 BTC. What’s more, another 200,000 BTC was reported to be missing in an old format Bitcoin wallet.

Five days after this incident, Karpeles filed bankruptcy claiming a debt of $63.6 million. In August 2015, they arrested him in Japan for fraud and embezzlement charges. He was released under bail in 2016. But in 2019, police arrested him again for tampering with electronic records connected to the Mt. Gox books. They found him guilty and sentenced him to two and a half years in jail.

Going back to February 2014, due to the overwhelming amount of cryptocurrency lost from the hacking incident, the exchange filed bankruptcy protection in Tokyo. The following month, the exchange filed another bankruptcy protection in the US. These events made the exchange to permanently shut down its operation in the same year.

Bitgrail

Bitgrail is a now-defunct Italian crypto exchange that offered trading pairs in BTC/XRB, BTC/ETH, and many more. Francesco Firano operated and founded the platform.

On February 9, 2018, the Bitgrail exchange ceased its global operations due to an alleged crypto exchange hack. As per the founder of Bitgrail, this attack caused the exchange to lose 17 million Nanos (XRB), which is equivalent to 150 million euros at that time. To cover the losses of the hack, Firano tried to convince Nano developers to modify their account ledger. Unfortunately, the developers declined the offer. They know that data modification in historical blocks is unlikely to happen.

These incidents resulted in controversies between Firano and the Nano developers. It also distressed the investors and users of the platform. To support the hacking victims, the Nano Foundation announced that it would create a legal fund that will help them in the pursuit of legal representation and hacking investigation.

In March 2018, Firano announced refunding 20% of its investors’ stolen Nano. On the other hand, the remaining 80% will be refunded in the future. However, it is not as easy as it sounds. In February 2020, the victims needed to resubmit their applications in order for the exchange liquidators to acknowledge their refunds. Furthermore, the exchange will no longer entertain claims in the form of digital assets. Rather, they will give claims in euros.

Bitfinex

In August 2016, the Bitfinex crypto exchange announced that hackers penetrated its system. This attack focused mainly on Bitcoin, leaving all other altcoins in the platform unharmed and intact. The hackers stole 119,756 bitcoins, which is equivalent to $72 million at that time.

Despite the attack, the platform managed to uphold its company’s position and avoided bankruptcy. To compensate investors who lost their bitcoins during the attack, Bitfinex provided each affected customer with BFX tokens. As per the company, this token can be redeemed in the exchange or be traded for shares at the platform’s parent company iFinex.

Investors can then exchange 1 BFX for every $1 lost. Apparently, BFX is just a temporary token. Hence, it would be destroyed once all redemptions are done. Those who choose to trade the BFX token for shares of iFinex are provided with the Recovery Right Token (RRT). This token will enable its holders to reimburse any funds recovered from the attack.

In July 2020, Whale Alert announced that an unknown wallet received Bitfinex’s stolen BTC. Today, the hacked amount is worth over $1.3 billion. Until now, the individuals behind the attack remain unknown.

Bithumb

Bithumb is one of the largest crypto exchanges by trading volume. BTC Korea.com created it in 2013.

On June 19, 2018, unknown hackers robbed the number one crypto exchange in South Korea. Hackers managed to reap an amount of over $30 million worth of cryptocurrency. This attack made the exchange halt all its activities, mainly the deposit and withdrawal, to avoid further damage. As a precaution, the exchange transferred all its remaining user assets in a cold wallet for safer storage.

The crypto exchange hack incident happened after a week when the exchange was cleared from its three-month investigation, which involved the exchange in illicit activities. However, the exchange was still mandated to pay 30 billion won in taxes, which is approximately $28 million.

Despite the losses and the hacking attack that the exchange has faced, the platform still managed to recover and serve its customers. As a matter of fact, the exchange released an announcement that it will provide a refund or reimbursement to all users that are affected by the trouble. The platform never filed for bankruptcy and continues to operate as one of the most-used exchanges by crypto traders.

Moreover, the exchange was raided consecutively for three times in September 2020. The alleged selling of the exchange’s native BXA tokens, which cost over $25 million, is the reason behind the third raid that happened. This raid caused the exchange’s 24-hour trading volume to drop from $600 million to $166 million.

Other Hijacked Crypto Exchanges

Aside from the crypto exchanges listed above, there are also other less famous crypto exchange hacks that happened in the crypto space. These hackers belong to the criminal world’s upper organizations as they can hide their identity well in penetrating the exchanges’ systems and stealing the platform’s digital assets.

Some of the crypto exchanges that suffered in the hands of hackers include:

  1. Zaif. A Japan-based crypto exchange that lost 5,966 of BTC on September 14, 2018. This exchange stored its fund mostly in a hot wallet which allows the hackers to easily infiltrate its system.
  2. Nicehash. A Slovenian exchange that lost more than 4000 BTC on December 6, 2017. This happened when the hackers managed to gain access to the Nicehash network to re-route the users’ mining power to the hackers’ mining pool.
  3. Vircurex. A Beijing-based exchange that lost 1,454 BTC in May 2013. The loss is due to the massive withdrawal of funds from unknown sources that led to a total emptying of the exchange’s portfolio.
  4. Coinrail. A South Korean exchange robbed with an estimated amount of $40 million worth of cryptocurrency on June 10, 2018. A cyber intrusion caused the hack.
  5. Cryptsy. A crypto exchange that lost 13,000 BTC in 2014 due to a trojan malware that has been injected into the platform’s system that made hackers transfer cryptos illegally.

Conclusion

Today, cryptocurrency assets are considered to be a modern form of investment. There are many ways to invest in cryptocurrency, and one of them is by using a crypto exchange. These crypto exchanges provide the easiest way to buy, sell, and store crypto assets online.

Users become vulnerable to hackers and malware due to the ease of online transactions. In the past few years, many crypto exchanges have experienced the wrath of these hackers. Some survived the attack and managed to rise and continue their operations while some did not make a recovery at all.

There are many types of crypto exchanges out there and it is important to keep in mind that as long as it is connected to the internet, there is a chance that hackers could penetrate it.

The crypto exchange hacks don’t just damage the crypto exchange but also its users. In order to avoid these kinds of attacks in the future, it is best to conduct in-depth research about the crypto exchange.

Therefore, crypto exchanges are not advisable as long-term storage for digital assets. We recommend transferring your digital assets on non-custodial wallets or cold wallets for guaranteed security. These wallets provide you full control of your account which gives hackers a very slim chance of success.

CoinQuora Staff

CoinQuora is an online publication that aims to educate about news, exchanges, and markets in the cryptocurrency and blockchain industry

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