Bitstamp Bitcoin Exchange Suspended Due To "Compromised Wallet"

twitnutttt writes Customers of Bistamp, the successor (until recently) to MtGox as the highest-volume dollar-denominated Bitcoin exchange, and still the preferred source of trading data for many technical analysts, sent an email at about 4:00 UTC today warning that, "Today our transaction processing server detected problems with our hot wallet and stopped processing withdrawals." They also instructed users to stop sending any deposits immediately or they may be lost. The Bitstamp website has now also suspended all exchange/trading services, and the homepage contains only a maintenance message warning users of a "compromised" wallet. Numerous references to security imply that this is a hacking attack, but Bitstamp reassures that they maintain "more than enough offline reserves to cover the compromised bitcoins."

Comments

Soundtrack contest

[Sarten-X]

I now have "Another One Bites The Dust" in my head.

Anybody have any better music suggestions appropriate for this story?

I can't tell you how relieved I am.

[fuzzyfuzzyfungus]

It's a terrible sign of the times that this is so; but it's so goddamn heartwarming to see that we at least have some financial institutions around that aren't too big to fail...

Somehow banks...

[TWX]

...with the regulations in place that generally put limits on their bad behavior, aren't looking so bad now, are they?

And for those who want to go off on overdraft fees, you can have your account set to simply not let you go overdraft. It'll deny any transactions that would let you overdraft though, so it's a catch-22.

I have no love for big banks, but at least there are rules governing how my accounts are handled, they can't brazenly steal all my money in one swoop.

Re:Somehow banks...

[Anon-Admin]

Right, regulations help.

Back some years ago I was using a bank that over drafted me. I say they over drafted me because they showed an ATM withdraw some 50 miles from where I was that caused my account to over draft.

I had paid the overdraft fees and explained to them that I could not have been there to withdraw the $62 they claim. The lady tells me that as per bank policy I am responsible for the first $50 lost from the account and there would be a $10 "search" fee for them to research what had happened and determine if I had withdrawn the money or it was a bank error. My simple question, "If it turns out to be a bank error do i get my $52 back?" Well no, as per policy I was responsible for the first $50 lost so I would only get $2 back.

I told them to do the research, give me my $2 and close my account. The bank persons response, "Absolutely, there is a $2 filing fee to start the search, $10 for the search, and you are responsible for the first $50 lost. Then there will be a $15 fee to close out your account."

It amazes me how they lost the exact amount that it would require to $0 out. I close that account and simply moved of. The moral of this story is you may have faith in religion, with all others watch your ass because they will take all they can get.

Re: Somehow banks...

[Anonymous Coward]

The solution isn't regulation.

The solution is innovation.

These 1st generation exchanges don't use multiparty keys. So they have to keep all the bitcoins on hand. This makes them big fat targets.

Gen 2 exchanges will be decentralized and use m of n keys to protect the funds and simultaneously NOT hold the funds on hand themselves.

Very smart people are already working on this problem.

The LAST thing we need is red tape screwing up the innovation economy.

Decentralized exchanged already exist in one form or another. They just aren't as popular.

Re:Somehow banks...

[msauve]

That's nothing. They wanted a fee to close an account, so I just planned to run it close to 0 and let it sit. They'd eventually figure out that mailing monthly statements was costing them money, and close it on their own. So, I used a debit card, but accidentally tried to pay a bit more than was in the account (by $1 or $2). That kicked off some fee (not overdraft, since they declined the transaction), which they promptly took out of the account, making it overdrawn. So, they could overdraw the account, even if I couldn't. Then, they started charging a daily overdraft fee on the account. About a month later, they complained that I somehow owed them hundreds of dollars for the overdraft they themselves created. That was the first notice I received that they were charging me a daily fee. They never got their money.

Re: Somehow banks...

[jellomizer]

Innovation like being able to have low interests on a high risk loan. By selling fractions of that loan across many organizations so the liability of any one loan isn't so great.

This seemed like a good idea at the time. The person getting the loan can get a low interest payment, the person who is selling the loan can get the commission for the loan, the sub prime lenders make out as they get for the most part their money back....
Just as long as the economy doesn't sink, and those high risk individuals start dropping out in droves. Meaning you have a lot of assets in high risk loans which are failing.
Because while the risk was reduced for the individual purchase, the risk was increased over the aggregate.

Now during the boom time, this was seen by most people as a good thing. They were worrying about the housing market to pop, but not on the fact the lenders were loading up on high risk loans. Because as most people saw it. That these people can get low interest rates for homes, thus improving the number of home owners that can build wealth over time.

Re:Somehow banks...

[Anon-Admin]

Say hello to ChexSystems

https://www.consumerdebit.com/...

Unlike credit reporting there is no time limit on it and banks will refuse to issue you an account based on the information. I know because the bank that I closed the account on charged me an account fee after the account was close. I was never notified so did not know it was there. Some years later (10) when trying to change banks I was declined because that was in the chexsystems report. The original bank had gone bust, been sold to another bank that went bust and was sold to another bank that later split into three banks. It took me 2 months to track down who had the original records and could clear the entry on the chexsystems report.

Utterly predictable

[jareth-0205]

So who still thinks Bitcoin is a usable practical idea?

Re:Utterly predictable

[jareth-0205]

With the massive caveat that real money banks are backed and insured at the state-level (atleast in Europe, where most governments guarantee a certain amount of savings), while who the hell knows how well these websites are capitalised and secured.

Re:Utterly predictable

[slashdice]

Cash is not practical? Damn, why have we been using it for the past 2,700 years?

Somehow regulators...

[fraxinus-tree]

...generally make everyone think that they do some good. And banks still fail - with all of your money, sometimes. If they don't it is not because of regulations. It is just because they have better return this way.

Re:Bitcoin still seems sleazy to me

[gstoddart]

The entire notion of bitcoin has always seemed a little sketchy to me.

We're going to make up a money, and we're going to simultaneously claim it's secure and private, but we'll attach every transaction to the history of the money -- and then put it in the hands of any old schmuck who makes a website.

We'll claim to be an awesome alternative to government issued money, free of regulations and taxation, but we'll still try to be honest players (we promise). And a fucking pony.

The whole ecosystem seems like a pipe dream, which completely ignored reality, and has been subject to fraud and abuse for pretty much as long as I've been aware of it. FAR worse than the 'real' financial system.

So, whine all you like about the tyranny of government issued money ... you mostly sound insane, and have gotten into an overhyped, and apparently completely insecure currency.

The first time I heard of BitCoin I thought "what the heck is this for?". And pretty much every time I've heard it since, I've found myself thinking it sounds pretty sketchy.

I'm sure people will rabidly defend it, for whatever reasons they have ... but, seriously, every time I hear about BitCoin it's because it's not living up to any of the expectations, and you're putting your money into a completely unregulated pool with dodgy players.

So, I'm afraid I continue to be underwhelmed by the existence of Bit Coin, and mostly keep laughing my ass off when people lose their shirts.

Don't believe the hype.

Me, I'll stick with my bank, which operates under identifiable laws, using currency for which there is at least a pretense for the valuation and exchange rates, and involving players with many more years of proven ability to actually play this game.

But, hey, feel free to put your money wherever the hell you like.

Hierarchical wallets

[QuantumReality]

So how they got their wallets compromised? i mean it's 2015, we have hierarchical deterministic wallets which means you can't steal ANY bitcoins, because even if you have access to the server the only thing you can get is public keys. So we have 2 possibilities: one: they use normal wallets = amateurs, two : whole servers were compromised. No other solution.

Re:No price move

[jeremyp]

In fact, according to http://www.coindesk.com/price/ the price has dropped about 15% in two days.

I prefer my money to be stolen the old fashion way

[JoeyRox]

By banks and governments, thank you very much.

Re:No price move

[jbssm]

Actually, Bitcoin took a bit hit 36 hours ago and today you got the news. What this tells you is that insider trading is alive and well in the bitcoin world. Someone already knew of the hack and dumped the market.

Now expect further dumps just before worst and worst news resurface about this matter... just another typical day in bitcoin.

Re:Bitcoin still seems sleazy to me

[timholman]

The entire notion of bitcoin has always seemed a little sketchy to me.

Not just sketchy, but pointless (at least to the average consumer).

What sane person would use a debit card that mandates irreversible transactions if you are cheated by a merchant, makes you liable for all fraudulent use of the card, and takes several minutes for a purchase to be validated? Because that's basically what Bitcoin is. It's like stepping 50 years into the past, into a world without consumer protection laws.

If you were an early adopter of BTC, obviously you have a huge incentive to push for wider adoption, as this lets you turn your CPU-mined BTC into free money. But if you are someone who has never touched BTC in your life, you have no incentive to buy them now, and none to use them. It doesn't matter how many merchants accept BTC, because the average shopper would be insane to use them.

Regardless of what happens to the exchanges, BTC has hit a brick wall in adoption. Read about the experiences of merchants in Florida who signed up to accept BTC prior to the Bitcoin Bowl. Several of them stopped accepting BTC when it became apparent that no one was spending them.

Fiat Better?

[Tokolosh]

http://www.wsj.com/articles/ch...

The value of the ruble isn't the only thing that is vanishing in Russia. A Moscow hedge fund chief executive has disappeared, along with all the money in the firm's accounts.

That's according to a stunning feature in The Wall Street Journal. Kim Karapetyan, 29, the youthful founder of Blackfield Capital CJSC, has disappeared, much to the dismay of his staff, which didn't know until a group of men charged into the firm's plush offices.

From The Journal:

The firm’s employees didn’t know anything was amiss until mid-October, when three men charged into Blackfield’s offices in an upscale complex along the Moscow River in central Moscow, said people who were there.

The men, who didn't identify themselves, said they were looking for Blackfield's 29-year-old founder, Kim Karapetyan, according to the people who were there.

But Mr. Karapetyan wasn't in the office that day or the next, when senior executives explained to the staff of about 50 that there was no longer any money to pay their salaries, said one former senior executive and ex-employees. The executives disclosed that all the money in the company accounts — some $20 million, including investor cash — was also missing, they said. It couldn't be determined whether investors were from Russia or other countries.

"Our CEO just disappeared," said Sergey Grebenkin, one of the firm's software developers, in an interview.

No attempts to contact or find Karapetyan were successful, and he is still MIA. The company's website brags that its "systematic investment process helps avoid human-factor, cognitive-biases, and emotional-trading errors," but the CEO running away with all your money seems like a fairly big human error.

Re:Where should I hold my Bitcoins?

[petermgreen]

Given the overall shady nature of the organisations surrounding bitcoin trusting a service to store your bitcoins is folly. So you have to store them yourself.

How you do that is a tradeoff between cost/inconviniance and risk.

The normal method of risk management for those holding large numbers of bitcoins is to have a "hot wallet" and a "cold wallet". The hot wallet is where you keep the bitcoins you need on a day to day basis, you accept that if you get hacked you have a good chance of losing it's contents.

The cold wallet is where you keep the bulk of your bitcoins. You keep the keys to the cold wallet offline and possiblly consider using a secret sharing algorithm with parts of the key distributed between multiple secret locations (e.g. if you use a 2 of 3 secret sharing setup then the comprimise of any one location won't cause loss or compromise of the secret).