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Alberta-based Flexcoin shuts its doors after bitcoin theft

Shutdown comes a week after Mt. Gox closed up shop

Jim Kerr is Alberta Venture's web editor. Get in touch with him at jkerr@albertaventure.com.

Mar 6, 2014

by Jim Kerr

It’s another blow for the bitcoin community.

Alberta-based “bitcoin bank” Flexcoin says it was robbed of almost 900 bitcoins on Sunday, leaving it with no option but to cease operations. The company says hackers exploited a front-end flaw in its system allowing people to transfer funds between Flexcoin users.

The theft of about $600,000 worth of the digital currency comes a week after Mt. Gox, once the largest bitcoin exchange in the world, was robbed of over $300 million. That incident was said to be the result of an overlooked design flaw.

Flexcoin says the attacker sent thousands of simultaneous transfer requests and was able to “move coins from one user account to another until the sending account was overdrawn, before balances were updated.” That was then repeated over multiple accounts, before the attacker withdrew the coins.

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In a statement on the company website, Flexcoin says it “has made every attempt to keep our servers as secure as possible, including regular testing. In our three years of existence, we have successfully repelled thousands of attacks. But in the end, this was simply not enough.”

The Edmonton Journal reports the company’s terms of service says it doesn’t insure any of the bitcoins stored on its system, and is not liable for any lost bitcoins. However, if users had their coins in “cold storage,” which means they were held offline, they can verify their identity with the company and have their coins transferred out for free.

Do the latest developments make you doubt the security of these bitcoin banks and exchanges? Will you still invest?

Tweet us @AlbertaVenture with your thoughts.

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