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Alexey Nasonov

Alexey Nasonov expert of Worldcore

Five major cryptocurrency exchange collapses

The June 2018 hacking of Bithumb, the sixth largest cryptocurrency exchange in the world at the time, has gone practically unnoticed, despite the relatively large stolen amount: 35 billion Korean won ($31 million). The markets did not react or reacted very vapidly, Bitcoin went down $200, having bounced back $150-170 after a press release that contained comments and guarantees to cover the losses.

Such behavior of the cryptocommunity is understandable, since high-profile theft from cryptocurrency exchanges has become if not the new reality, then at least it no longer causes excessive nervousness and panic among market participants. According to the estimates of Ciphertrace, a company that specializes in cybersecurity in the blockchain environment, this year saw the theft of $731 million from crypto-exchanges and crypto-wallets, so Bithumb’s losses have amounted to less than 5% of all the funds stolen from various sources.

Much in the market reaction depends on the amount of stolen funds, so after the launch of its own secure exchange, Worldcore, a European fintech company, prepared a study on the five major cryptocurrency exchange collapses since 2013. The ranking was conducted according to the amount stolen at the July 2018 cryptocurrency/USD rate, and at the rate of the month of hacking.

“Starting with the historic first hack of the user Allinvain in June 2011, cryptocurrency assets have become a honeypot for various scammers and hackers,” says Worldcore CEO Alexey Nasonov.

“First and foremost, it is due to its high anonymity and digital nature, which make it convenient for stealing. As well as the great carelessness of the owners, who have multiplied their net worth manifold in the recent years, but still consider Bitcoin a 100-dollar asset.”


5. BitGrail, February 2018.

17 million XRB/Nano stolen. Approximately $200 million at the time, or $40 million at the July rate. Questionable hacking circumstances point to the exchange owners being either directly or indirectly (in an attempt to cover up an earlier hack of 2017) involved in the hack. The story became public, there was no reimbursement, and, under the pressure of official allegations, BitGrail owner Francesco Firano had first agreed to partially compensate the losses to those who would forego further court proceedings, and later, at the order of the court, was forced to give the contents of all of the company’s cryptocurrency wallets, as compensation against the claims of the injured persons.

4. July 2017. One of the major exchanges of the time — BTC-e.

FBI shut down the exchange due to allegations of money laundering and financial fraud. At least 485,000 ETH was withdrawn and washed out over other wallets, $100 million then or $230 million now. Clients are fighting unsuccessfully for the return of the money with the legal successor — the WEX exchange.

The story with the closing of this exchange is not that simple — judging by the user services being revealed, it really was not the most honest exchange site, and the allegations of criminal money laundering brought up by federal agents had major foundations.

3. January 2018. Coincheck.

523 million NEM were stolen from one of the exchcange’s last ‘hot’ wallets, which was equivalent to $500 million then, or $95 million now. It is the largest 2018 hack to date, and the second or third in the history of cryptocurrency. It has entirely destroyed the management’s plans to expand and develop the exchange, and the moral and reputational damage was so great that the Japanese financial regulator FSA had implemented one of the toughest sets of rules for cryptocurrency exchange operations. The affected exchange had sold all of its shares for $34 million to the online broker Monex Group.

2. July 2016. Bitfinex.

120,ooo Bitcoin was stolen from the exchange’s multi-signature wallets, in the amount equivalent to approximately $78 million then and $840 million now. The exchange did not pay out any compensations, but issued its own debt token, BFX, which was fully exchanged for dollars at a one-to-one rate in early April 2017. Considering the fact that the token initially traded at under 40 cents, it was an acceptable procedure for both the exchange and the traders who have invested their trust in it. However, not everything went smoothly, and some of the owners of the stolen funds are still trying to receive compensation.

1. February 2014. Mt.Gox 850,ooo BTC.

The greatest theft in the cryptocurrency world. $425 million then, and, as crazy as it sounds, USD 6.3 billion now. The platform that hosted 80% of Bitcoin trades at that time was destroyed. After the conducted research it became clear that security issues have existed at least since 2011, which allowed hackers to steal large amounts in a clandestine manner, masking the theft for the security systems as placing the funds in ‘cold’ crypto-wallets. In 2017, a significant portion of the stolen Bitcoins was discovered in the wallets that belonged to Alexander Vinnik, the BTC-e exchange owner who was arrested for criminal money laundering.

“Exchange users who are not professional traders, but only want to exchange their currency at a pre-set rate, should only use decentralized exchanges for greater security,” recommends Alexey Nasonov from Worldcore.

“And exchange owners should be advised that ‘cold’ wallets should be used wherever possible, and a preventive security system that blocks questionable transactions, up to and including the instant blocking of the entire exchange operations, should be financed. Compare the reaction of the Binance securty system during the March 2018 hack, and Coincheck’s in January 2018. The potential threat was comparable, but the speed of account blocking was not. As a result, Binance was shaken but unhurt, while Coincheck was forcedly sold.”



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