Top 5 Bitcoin Hacks and Frauds in History
During its short and tumultuous existence, Bitcoin has shown a baffling increase in value from $0.06 back in 2008 to $20,000 in December 2017. It’s gained lots of public interest and become one of the most popular topics to discuss in the last few months. Bitcoin has shown the world a much more profitable way of investing your money than there’s ever been before.
However, a smart investor should understand that high values are often associated with high risks as well. Having shown such a big value, Bitcoin has become a juicy target for different sorts of scams, hacker attacks and other crimes.
Besides, modern technologies have made it quite easy for thieves to cover their tracks. If you exchange bitcoins for one of the untraceable altcoins such as Dash or Monero, the transaction will be lost forever in the network and you will never be able to find the villain.
See also: How to recognize a bitcoin scam
The history of the cryptoworld has seen many thefts of such sort. Some of those thefts are related to the sums so big that it’s even difficult to perceive them. In today’s post, we’re going to review the biggest ones as we continue our series of articles about your cryptofunds security.
#1. Allinvain, June 2011
Lost amount: 25,000 BTC.
On June 13, a user with a nickname Allinvain posted a note on bitcointalk.org stating that 25,000 BTC were stolen from his PC that fateful morning.
“I am totally devastated today. I just woke up to see a very large chunk of my bitcoin balance gone,” he wrote in that post. He also posted the address where the money went to, and asked the community for help. But the money was gone forever, it seems.
In the beginning of 2011, bitcoin was worth less than a dollar, but in June its price suddenly spiked up to $20 per 1 BTC. By that time, the amount that Allinvain possessed was around $500,000.
Now that bitcoin is worth more than $11,000, this sum would have made its owner a millionaire who could do nothing till the end of his days.
#2. Mt.Gox, June 2011 and February 2014
Mt.Gox was a Japan-based Bitcoin exchange with a sad reputation as it was hacked twice.
In 2011, a security breach of Mt.Gox first made the bitcoin price drop to 1 cent, then the hackers allegedly used one of Mt.Gox auditor’s compromised computer to steal a large amount of bitcoins. After the transfer was complete, BTC price regained its positions. The whole operation took no more than a couple of minutes. The stolen amount was equal to $8,750,000 at that time.
In February 2014, Mt.Gox suspended all trading due to some technical issues. The problems continued for a whole month and made the bitcoin price decrease by 36%. By the end of the month, the company said it had lost about 850,000 BTC in that attack and declared itself bankrupt. This sum was worth about $473 mln at that time.
#3. Bitcoinica, March 2012
Lost amount: 43,000 BTC.
Bitcoin was approximately $5 worth at that time, so the total loss makes up about $215,000.
The hackers exploited a vulnerability in the shared online web host Linode and stole at least 46,700 bitcoins from some of the Linode users. 43,000 of those bitcoins were kept at the Bitcoin exchange named Bitcoinica.
The 2nd attack on Bitcoinica took place only 2 months later. 18,000 BTC were stolen at that time. The company didn’t survive this attack and declared itself bankrupt.
#4. Bitcoin Savings and Trust, August 2012
Lost amount: 500,000 BTC.
This company carried out a classic Ponzi scheme. It offered investors to buy bitcoins from them and then sell with 7% profit per week, which would have made 365% in a year.
The fraudulent company managed to gather about 500,000 bitcoins before its default in August 2012.
One year later, the judge ordered its organizer, Tendon Shavers, to pay back his victims more than $40 mln in reparations. In 2012 the sum he stole was equal to $6 mln. A year later it was close to $500 mln as bitcoin price had increased up to almost $100 per 1 BTC.
#5. Bitfinex, August 2016
Lost amount: 120,000 BTC.
Bitfinex is currently one of the largest cryptocurrency trading platforms on the market. However, it has had its problems in the past, too, and who knows what may happen to it in the future?
In August 2016, Bitfinex announced a 120,000 BTC theft which made bitcoin price drop from $607 to $515 in a matter of a few hours. The reason for the failure was the vulnerability of their Multisig wallet architecture.
However, the company managed to refund almost the whole sum with the help of its BFX tokens that could be exchanged for USD.
Although Bitcoin is much more secure than fiat money that we’ve been using for ages, the services that are associated with it can’t give users a 100% guarantee that their funds will never be hacked or stolen.
To avoid being robbed, follow some simple security rules. Never keep all your funds on one platform or in one wallet, use a strong password and 2-factor authentication to secure your funds and always double-check the address where you want to send your bitcoins to.