Ever since the Internet was invented, hackers have infiltrated thousands of websites and databases around the world. Some of the biggest hack incidents targeted government agencies like the FBI and security systems like Iran’s nuclear systems. In the crypto space, hacking almost always mean the enormous loss of cryptocurrencies. Hacking in this industry has happened so many times that the 5 biggest crypto hacks led to nearly $1 billion lost.
1. The Mt. Gox Hack
Four years after a disastrous hack incident that led to more than 740,000 Bitcoins lost, Mt. Gox remains one of the most infamous hacking heists in the cryptocurrency space. The Tokyo based exchange was launched in 2010 by developer Ted McCaleb. In 2011, Ted sold the exchange to another developer, Mark Karpeles.
Karpele’s reign as the exchange’s boss was nothing but admirable. Five months after buying the exchange in March 2011, Mt. Gox was compromised, and 2,609 Bitcoins were stolen. Apparently, the hackers compromised a computer belonging to an Mt. Gox's employee but sent the stolen Bitcoins to an invalid address. Consequently, the Bitcoins didn’t have a valid private key and couldn’t be accessed. Learn more about Bitcoin private keys and addresses here.
Mt. Gox overcame the 2011 hack with little effect. However, in 2014 another hacking incident occurred that tore the company apart. Prior to the attack, Mt. Gox was handling 70% of all Bitcoin transaction in the world 6% of total Bitcoins in circulation. In early 2014, hackers infiltrated the company’s security systems and stole nearly 850,000 Bitcoins valued at $450 million at the time. 200,000 Bitcoins would later be recovered, but to date, few if any of Mt. Gox's victims have never received compensation.
According to cyber experts who handled the hacking incident, hackers compromised Mt. Gox’s online wallets between 2011 and 2014.
Founded in 2011, Bitstamp is one of the oldest exchanges still in operation today. But like several major crypto trading platforms, Bitstamp has experienced a hacking incident. In mid-2015, Coindesk reported that several hackers targeted Bitstamp’s employees via email and Skype, sending them documents that contained malware.
In a classic phishing incident, one of the targeted employees downloaded a compromised document, opening a malware that compromised the exchange’s hot wallets. The result was that nearly 19,000 Bitcoins were lost in late December 2014. The Bitcoins were valued at $5 million at the time. Bitstamp became aware of the incident on 4th January 2015. They quickly mitigated the situation but kept crucial details about the hack private.
Currently ranked 5th among the largest crypto exchanges based on daily trading volumes, Bitfinex has suffered a hacking incident in the past. In fact, Bitfinex’s hacking heist in August 2016 was the second biggest hacks since the Mt. Gox cyber-attack. More than 120,000 Bitcoin valued at $66 million worth of Bitcoins were stolen during the incident.
The exchange’s hack incident was huge enough to affect Bitcoin’s value. The cryptocurrency, which had been trading at around $600, went down to $540 several hours after the incident. Unlike other exchanges, the attack at Bitfinex was a little bit complex. Bitfinex had recently deployed a new system of holding Bitcoin addresses for their customers known as multi-signature.
With the system, Bitfinex partnered with another company, BitGo, which stored one of the keys needed to withdraw Bitcoins from their platform. Bitfinex would then store 2 other keys. After the hack, it remained unclear as to whether hacker compromised BitGo or BitFinex. All in all, Bitcoins were lost, and owners never received compensation.
Gatecoin is a Hong Kong-based exchange service that trades decentralized autonomous organizations (DAOs). Simply put, DAOs are Ethereum based assets that allow members to fund a project and benefit from it once it is successful. Gatecoin's hack incident occurred in mid-2016 and resulted in more than 185,000 ether coins and 250 Bitcoins stolen.
In total, the Gatecoin hack led to the loss of $2.14 million worth of cryptocurrencies. As first reported by Coindesk.com, the incident occurred over a period of three days.
5. Cryptsy Exchange
A now-closed exchange rose to the center of unwanted attention in early 2016 after the owners admitted they lost 13,000 Bitcoins in a hacking incident back in 2014. At the time of the hack, 13,000 Bitcoins would be valued at $2.8 million. When news came out, the same Bitcoins would have been valued at $7.5 million. Cryptsy also lost 300,000 litecoins in the hack, in total leading to a loss of $10 million.
Cryptsy made the announcement with the hope that someone would bail them out. They claimed to have had liabilities valued at $4.15 million. The exchange’s announcement received mixed opinions, with most customers irking over the fact that the incident was not reported to security authorities.
Currently ranked as the third largest exchange based on daily trading volumes, South Korea based exchange suffered a hacking incident in mid-2017. According to the exchange's official statement, hackers targeted a compromised computer that belonged to an employee.
The hackers didn’t actually steal Bitcoins from the employee but rather crucial data belonging to 30,000 customers. They later impersonated BitHumb’s employees and demanded some of the customers to provide crucial passwords and private key details about their Bitcoins. The end result was that Bitcoins worth more 1.2 billion won or $870,000 was stolen.
Coincheck announced in January 2018 that hackers had stolen $532 million worth of cryptocurrency assets on their exchange. This made the exchange officially the most compromised cryptocurrency exchange since the Mt. Gox hacking heist in 2014.
Unlike most hack incidents, hackers targeted NEM coins and not Bitcoins or Ethereum. Immediately after the attack, Coincheck posted a blog post on their website explaining the incident. They also suspended NEM trading on the platform. NEM CEO also quickly announced that NEM was working with the exchange to help recover the coins.
Almost every month, there seems to be a cryptocurrency exchange targeted by hackers. Even more popular exchanges like Binance and Coinbase have been targets of late. Where hacking has occurred, victims almost always do not recover their digital assets. Cryptocurrency owners are advised against storing their coins on exchanges but instead store them in offline personal wallets.
About the Author
Mark Schwarz is the creator of aBitGreedy.com. He is engaged with bitcoin sense 2013 and he is a blockchain software engineer. Has involvement in programming progressive blockchain programs.