Attackers have managed to steal Bitcoins worth more than $1 million (1295 BTC) from Danish payments startup Bitcoin Payment Solutions (BIPS), the firm has admitted.
The apparently Russian-originated breach occurred between 15 and 17 November when BIPS was hit by DDoS attack which turned out to be a distraction designed to allow criminals to launch a separate raid on servers hosting consumer Bitcoin wallets.
"BIPS has been a target of a coordinated attack and subsequent security breached. Several consumer wallets have been compromised and BIPS will be contacting the affected users," the firm said on 17 November.
The firm closed the wallet feature for consumers before noting, rather tactlessly, that it had not "been BIPS core business and as such regrettably affecting several users has not affected BIPS merchant acquiring."
Making matters worse, the firm had to suspend its usual helpdesk pending a move to a separate host and asked affected users to contact it via email. This was only reinstated on 22 November.
This won't come as much relief to the affected users who are now down an unknown portion of their Bitcoin stash. BIPS claims to have around 20,000 consumers of different types and is rated one of the largest Bitcoin operations in Europe. Given the emerging status of the currency, this probably isn't saying much.
"We will need their consent to hand over information to the authorities for further investigation, which hopefully can assist in catching the thief," said BIPS founder and CEO, Kris Henriksen on a forum thread.
The firm has also yet to explain how the attack occurred, with Henriksen announcing that that "technical information will not be disclosed for security reasons."
He further recommended that consumers abandon such Bitcoin storage systems completely and consider secure "cold storage."
Needless to say, Bitcoin traders have been unimpressed by BIPS' nonchalant attitude to their loss, with one user even threatening a lawsuit. But as a firm that launched as recently as March 2013, even without an action against it BIPS is unlikely to emerge with its reputation unscathed.
The whole affair has unsettling echoes of a similar attack on an Australian Bitcoin processor two weeks ago in which currency worth at the time around $1.3 million (£820,000) was lost.
"Bitcoin, and similar operations such as Litecoin, are of particular interest to cybercriminals because they can be used to purchase real assets, not just virtual assets," commented senior research fellow David Harley of security firm ESET.
"There are some attacks where your defences are only as good as your service providers' security allows."