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Bitcoin raid closes yet another online exchange

Posting in Finance
 
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The last month has not been good for Bitcoin holders or the future of the digital currency itself -- especially now as a second Bitcoin trading post closes after becoming the victim of  a cyberattack.

In the past few weeks, the largest Bitcoin exchange online, Mt. Gox, closed its doors without warning. After days of silence, the company CEO admitted that "system problems" were the cause -- specifically hackers that systematically made off with roughly $500 million in the digital currency.

Now insolvent, Mt. Gox left many consumers out of pocket.

Now another Bitcoin exchange, Flexcoin, has also shut down -- exacerbating security concerns over the currency.

Read also: ZDNet: The Mt. Gox bitcoin debacle: Bankruptcy filed, customer bitcoin lost

A notice on the firm's website says that hackers stole 896 Bitcoin, worth approximately $606,000, from the "hot wallet" which stores user Bitcoin online. The statement reads:

"On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately."

Unlike Mt. Gox, some Flexicoin traders may still be in pocket, as a number of Bitcoin were kept in "cold storage" -- offline and out of the hacker's reach. But only, of course, if they paid extra for the premium service.

"Users who put their coins into cold storage will be contacted by Flexcoin and asked to verify their identity," the statement says. "Once identified, cold storage coins will be transferred out free of charge. Cold storage coins were held offline and not within reach of the attacker. Flexcoin will attempt to work with law enforcement to trace the source of the hack."

While Bitcoin -- an unregulated, digital currency -- is being accepted in a number of physical outlets and on the Web, security remains a problem. The high value of each Bitcoin, rising from $100 just a year or so ago to $500+, makes hacking Bitcoin holders a lucrative business. Despite this, Bitcoin is worth about $7 billion at current market rates.

Hey, at least U.K. holders don't have to pay VAT.

Read on: The Guardian

Image credit: Flickr

— By on March 4, 2014, 8:49 AM PST

Charlie Osborne

Contributing Editor

Charlie Osborne is a freelance journalist and photographer based in London. In addition to SmartPlanet, she also writes for business technology website ZDNet and consumer technology site CNET. She holds a degree in medical anthropology from the University of Kent. Follow her on Twitter. Disclosure