Bitcoin bank Flexcoin shuts down after massive theft

Some $600,000 worth of bitcoins were stolen from the site

Flexcoin, a site that described itself as the "world's first bitcoin bank," has closed after it got hacked and all of the bitcoins it had placed in online storage were stolen, the site recently announced.

Flexcoin was attacked and robbed March 2 of all coins in its "hot wallet" -- a term that refers to bitcoin online storage -- the site said in an announcement posted to its home page. The attacker made off with 896 bitcoins, which at current prices across several exchanges would amount to roughly US$600,000.

Flexcoin also said it will return to their owners the bitcoins it had put in "cold storage," which weren't stolen because they're held offline.

The company will shut down immediately because it does not have the resources or assets to recuperate from the loss, it said. Flexcoin will work with law enforcement to determine the origins of the attack.

Flexcoin directs affected users to its terms of service. According to that document, Flexcoin transactions were carried out using HTTPS encryption but the company "is not responsible for insuring any bitcoins stored in the Flexcoin system."

Users should also monitor the company's Twitter account for updates about the situation, according to Flexcoin. In its most recent Twitter message, posted Tuesday, the company announced it would be "shutting its doors" and provided a link to its home page.

Flexcoin did not immediately respond to a request for comment.

Flexcoin's closure comes less than a week after Mt. Gox, a prominent Bitcoin exchange, declared bankruptcy following a hacking attack on its own site.

Just last week, Flexcoin asserted its strength in the Bitcoin industry. "We hold zero coins in other companies, exchanges, etc.," the site said in a tweet last week. "While the Mt. Gox closure is unfortunate, we at Flexcoin have not lost anything."

Zach Miners covers social networking, search and general technology news for IDG News Service. Follow Zach on Twitter at @zachminers. Zach's e-mail address is zach_miners@idg.com

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Tags internetlegalservicesstoragee-commerceintrusionInternet-based applications and servicesBitcoin FoundationFlexcoin

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Zach Miners

IDG News Service
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