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Bitfinex Exchange in Hong Kong Looses Bitcoin Worth $72 million

Bitfinex Exchange in Hong Kong Looses Bitcoin Worth $72 million
Rattling the global bitcoin community in the second-biggest security breach ever of a bitcoin exchange, nearly 120,000 units of digital currency bitcoin worth about US$72 million was stolen from the exchange platform Bitfinex in Hong Kong.
Bitfinex is known in the digital currency community for having deep liquidity in the U.S. dollar/bitcoin currency pair and is the world's largest dollar-based exchange for bitcoin.
119,756 bitcoin had been stolen from users' accounts and the exchange had not yet decided how to address customer losses, Zane Tackett, Director of Community & Product Development for Bitfinex said.
"The bitcoin was stolen from users' segregated wallets," he said.
The company was cooperating with top blockchain analytic companies to track the stolen coins and had reported the theft to law enforcement, it said.
BitGo, which uses multiple-signature security to store user deposits online, allowing for faster withdrawals had entered in to a tie up with Bitfinex last year.
"Our investigation has found no evidence of a breach to any BitGo servers," BitGo said in a Tweet.

"With users' funds secured using multi-signature technology in partnership with BitGo, a lot more is at stake for the backbone of the bitcoin industry, with its stalwarts and prided tech under fire," said Charles Hayter, chief executive and founder of digital currency website CryptoCompare.
For offering illegal off-exchange financed commodity transactions in bitcoin and other digital currencies, two months ago Bitfinex was ordered to pay a $75,000 fine by the U.S. Commodity and Futures Trading Commission and now this security breach.
This breach was reminiscent of events that led to the 2014 collapse of Tokyo-based exchange Mt Gox when it as reported that hackers had decamped with $500 million worth of customers' Bitcoins and Tuesday's breach triggered a slump in bitcoin prices.
After the news broke, Bitcoin plunged just over 23 percent on Tuesday. It was up 1 percent at $545.20 on the BitStamp platform on Wednesday.
a web-based "cryptocurrency" that can move across the globe anonymously without the need for a central authority and blockchain", the technology that generates and processes bitcoin, were reported to have not exposed any weakness, Tackett added.
The scandal highlighted the risks of companies using cryptography for their ledgers, a bitcoin expert said.
"The more you rely on its benefits, the greater the potential for damage when keys are stolen. We still have some way to go to create highly secure but convenient systems," said Singapore-based Antony Lewis.

The stolen bitcoins amounts to about 0.75 percent of all bitcoin in circulation.
Whether hackers were able to gain access to the system externally or whether it was an inside job is not yet clear. He was "nearly 100 percent certain" it was no one in the company, Bitfinex's Tackett said on an online forum.
After the breach was discovered trading was suspended on Bitfinex. It was investigating and cooperating with the authorities, it said on its website.
Last year media estimated that investors could have been duped up to $387 million after MyCoin became embroiled in a scam and the security breach is the latest scandal to hit Hong Kong's bitcoin market. The bitcoin trading company closed after the scandal.
The only way to protect information is to disperse it in so many small pieces that the reward for hacking is too small, said the president of the Hong Kong Bitcoin Association.

Christopher J. Mitchell

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