2012 Bitcoin and Altcoin Hacks [Part 4]

This article is part of our complete guide to Bitcoin and altcoin hacks. Here we cover Bitcoin and altcoin security incidents from the year 2012.

Bitcoinica / Linode Hack

Bitcoinica was hacked twice in 2012, which led them to shut down shortly after the 2nd heist.

In March 2012 Bitcoinica reported that 18,547 BTC had been stolen from its reserves. It was apparently a problem in the platform, because their found, Zhou Tong, mentioned they’d have to rewrite the platform completely. There were rumours that SQL injection had been used to gain access to user funds.

Later that year the Bitcoinica hosting provider was targetted. Linode was hacked and over 40,000 BTC were stolen off Bitcoinica’s servers.

This hack is known as the Linode hack, despite Bitcoinica being hurt the most.

The exchange shut down shortly after, claiming insolvency.

Zhou Tong made an effort to pay customers back. He donated 5000 of his own BTC and asked for help with donations on Bitcointalk.org.

Later in July, a post made to Bitcointalk by MtGox operators, including Mark Karpeles (MagicalTux) discovered that the whole Bitcoinica ordeal had been a big scam.

Zhou Tong’s email account had been used in an account at MtGox where stolen Bitcoinica funds had been deposited. He tried to claim that his Gmail was hacked, which didn’t succeed with the community.

By mid 2014 users were still seeking answers from Tong but it is understood that less than 2% of Bitcoinica’s customers received some form of compensation for the theft.

BitMarket

BitMarket.eu was a popular Bitcoin exchange running in Poland. If you visit their current site all you’ll find is a cryptocurrency blog.

What happened?

It turns out that in 2012 over 20,000 BTC were stolen from the exchange and they were forced to shut down.

Interestingly, an arrest made in 2016 in connection with the BitMarket investigation could be a link to many other hacks, including the already mentioned Bitcoinica case.

A different theory accuses the BitMarket hack of being an inside job.

Although there are claims that many clients received their funds back, this is not confirmed by a large number of BitMarket customers.

BitFloor

In September of 2012, Vitalik Buterin reported for Bitcoin Magazine that 24,000 BTC went missing from the Bitfloor exchange.

The attack was blamed on poor handling of private keys by the exchange operators.

A key backup was made to one of the server’s hard drives. The key was unencrypted and the hackers obtained easy access to them.

Here the former BitFloor owner explains what happened and offers a few more technical details.

Bitcoin Savings and Trust

Bitcoin Savings and Trust (BST) wasn’t exactly a hack in the technological sense.

Instead, it was one of the first large scale Ponzi schemes operated using cryptocurrencies with over 500,000 BTC managed at a point in time.

As with all ponzies, customers started mass withdrawing funds, which BST couldn’t honor, so the system collapsed.

The main BST operator, Trendon Shavers, received a sentence of 1.5 years in a Texas prison for the scheme.

The relatively short sentence was a result of a plea deal where Mr. Shavers agreed to pay creditors U$ 40.7 million in damages to 48 investors.

Links

Comprehensive List of Bitcoin Scams at Bitcointalk

Linode hackers escape with $70K in daring bitcoin heist

Bitcoins worth $228,000 stolen from customers of hacked Webhost

Thousands of Bitcoins stolen in a hack on Linode

Bitcoinica users sue for $460k in lost Bitcoins

Bitcoinica Stolen From… Again [Story by Vitalik Buterin in 2012!]

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