Flexcoin shuts down after hackers steal 896 bitcoins worth $670,000

Has the world of bitcoin collapsed? Many media outlets, pundits and tech experts are declaring so after Flexcoin, a Canadian-based exchange website, announced that it would be shutting down following a massive $670,000 virtual heist, notes the Globe and Mail.

Known as the “first bitcoin bank,” the platform stated that it would be winding down operations after hackers took off with 896 bitcoins. In its notice, Flexcoin told its users that it doesn’t have the necessary resources to continue operating.

“As Flexcoin does not have the resources, assets or otherwise to come back from this loss, we are closing our doors immediately,” the notice read. It added that it would be cooperating with local authorities to discover the source of the attack. So far, it has found that the money was transferred to two accounts, according to a news release.

The hacking consisted of the thieves taking all of its coins in the hot wallet, a part of the website that gives users immediate access to bitcoins. However, clients that had their bitcoins stored in its cold wallet, which is essentially an offline bank, would still have access to their funds free of charge.

“The attacker then successfully exploited a flaw in the [front-end] code which allows transfers between flexcoin users. By sending thousands of simultaneous requests, the attacker was able to ‘move’ coins from one user account to another until the sending account was overdrawn, before balances were updated,” the company said in an update Wednesday. “This was then repeated through multiple accounts, snowballing the amount, until the attacker withdrew the coins.“

The Edmonton Police Service (EPS) confirmed last week that it has begun investigating the issue, Reuters reported. “I can confirm that detectives from the EPS Economic Crimes Section and Technological Crimes Unit are following up with Flexcoin, and the matter is currently under investigation,” said police spokesman Chad Orydzuk.

This is the third bitcoin exchange to close its online doors after an attack. Mt. Gox made global headlines when it filed for bankruptcy earlier this month. More than $300 million was stolen because of security vulnerabilities in the Tokyo, Japan-based website. It was also reported that Poloniex shut down because of a web attack.

Despite the negative publicity that bitcoin has garnered over the past month or two, bitcoin’s price remains unaffected. At the time of this writing, bitcoin is trading at just over $600, up from around $400 at the time Mt. Gox became insolvent, but down from its all-time high of roughly $1,200 in November.

Many in the bitcoin community argue that Mt. Gox shutting down as well as the other exchanges is a good thing. The digital currency is still in its infancy period – close to five years old – and more experiments need to take place, different platforms need to adapt and heightened development needs to take place, according to some, such as Marc Andreessen, the co-founder of the very first web browser. Therefore, this is a step in the right direction.

“I will happily retweet all retractions and apologies from people who wrongly forecasted death of Bitcoin as result of MtGox collapse :-),” Andreessen tweeted last month, notes PFHub.