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Thursday, 06 March 2014 08:52

Another Bitcoin heist adds to cybercurrency woes Featured


Another bitcoin exchange has been forced to close its doors after being attacked by hackers, who made off with nearly a million dollars’ worth of the electronic currency.

The loss is tiny compared to last week’s high profile heist from Japanese bitcoin exchange Mt Gox, which lost nearly $500 million and was forced into bankruptcy. But it is a further blow to bitcoin’s credibility.

The Flexcoin attacker stole 896 bitcoins, currently worth about $675,000. It is the latest in a series of thefts which have called into question the continued viability of Bitcoin, and certainly dented its credibility.

Flexcoin, based in the Canadian province of Alberta, has posted a simple, and sad, message on its website (www.flexcoin.com):

“During the investigation into stolen funds we have determined that the extent of the theft was enabled by a flaw within the front-end.

“The attacker logged into the Flexcoin front end under a newly created username and deposited coins that were then left to sit until they had reached six confirmations.

“The attacker then successfully exploited a flaw in the code which allows transfers between flexcoin users. By sending thousands of simultaneous requests, the attacker was able to move coins from one user account to another until the sending account was overdrawn, before balances were updated.

“This was then repeated through multiple accounts, snowballing the amount, until the attacker withdrew the coins. Flexcoin 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.

“Having this be the demise of our small company, after the endless hours of work we've put in, was never our intent. We've failed our customers, our business, and ultimately the Bitcoin community.”

Meanwhile, in the wake of the Mt Gox implosion, news agency Reuters reports that the Japanese Government is moving to regulate and tax bitcoin transactions.

The Japanese cabinet is deliberating on how to treat bitcoins under existing laws, says the report. It may rule that banks and securities firms will not be able to handle bitcoin as part of their main business, and be treated more as a commodity, like gold.

"We haven't yet thoroughly grasped the situation, but some kind of regulation is needed from the perspective of consumer protection, and we will also discuss bitcoin from the perspective of imposing asset tax," Reuters quoted Takuya Hirai, head of an IT panel in Japan’s ruling Liberal Democratic Party.

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Graeme Philipson

Graeme Philipson sadly passed away in Jan 2021 and a much valued senior associate editor at iTWire. He was one of Australia’s longest serving and most experienced IT journalists. He is the author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’

He was in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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