Topic: [2017-09-29] Chaos and hackers stalk investors on cryptocurrency exchanges (Read 3073 times)

Sadly, hacking attacks against traders and users of online wallets get more and more sophisticated, for example I've recently read a reddit post where it was deduced that OP became a victim of man-in-the middle attack - some trojan malware had tricked his browser into connecting him to a fake Bittrex website while making it extremely hard to notice, after which attackers were able to get his Google 2FA session codes, log in to his real Bittrex account and steal more than 6 BTC. So, traders should be extremely careful - use only secure machines preferably with Linux or Mac, verify their connection by manually checking SSL certificate of a site and corresponding fingerprints, have up to date OS and antivirus protection. But better to just don't store funds on exchange and move them in and out, especially when the network fees are low.

The irony behind all this is that one of the primary benefits of a cryptocurrency is ability of the owner to hold it instead of relying on a third party. People that rely on others to hold their bitcoins for them are putting their money at risk unnecessarily.

I remember a funny story behind this.

Jackson Palmer warned everyone in the dogecoin community not to invest and deposit their coins in Moolah because he knew the owner was a scammer. But what happened was Jackson's own community called him a fudster and that essentially made him start leaving dogecoin.

This would be one of the disadvantage of cryptocurrencies not being able to track the hackers who stole the funds of the traders/investors. Many are still apprehensive in investing in bitcoin because of the thought that something like this might happen. The higher the value of cryptocurrency, the more enticing it is for the hackers. Cryptocurrencies have been a threat to financial institutions that's why they are spreading fear, uncertainty and doubt to its investors and sometimes what they are saying is true that's why we, crypto enthusiasts should take the necessary measures to have security enforced in our assets because we never know if the hackers are on the move again to get their hands in our funds.

Online exchanges for trading bitcoins and other virtual currencies can make fortunes for their owners. But they are largely unregulated, besieged by hackers and thieves, and fraught with risk for consumers.

LONDON/SHANGHAI/NEW YORK - Dan Wasyluk discovered the hard way that trading cryptocurrencies such as bitcoin happens in an online Wild West where sheriffs are largely absent.

Wasyluk and his colleagues raised bitcoins for a new tech venture and lodged them in escrow at a company running a cryptocurrency exchange called Moolah. Just months later the exchange collapsed; the man behind it is now awaiting trial in Britain on fraud and money-laundering charges. He has pleaded not guilty.

Wasyluk’s project lost 750 bitcoins, currently worth about $3 million, and he believes he stands little chance of recovering any money.

“It really was kind of a kneecapping of the project,” said Wasyluk of the collapse three years ago. “If you are starting an exchange and you lose clients’ money, you or your company should be 100 percent accountable for that loss. And right now there is nothing like that in place.”

Cryptocurrencies were supposed to offer a secure, digital way to conduct financial transactions, but they have been dogged by doubts. Concerns have largely focused on their astronomical gains in value and the likelihood of painful price crashes. Equally perilous, though, are the exchanges where virtual currencies are bought, sold and stored. These exchanges, which match buyers and sellers and sometimes hold traders’ funds, have become magnets for fraud and mires of technological dysfunction, a Reuters examination shows, posing an underappreciated risk to anyone who trades digital coins.

Huge sums are at stake. As the prices of bitcoin and other virtual currencies have soared this year – bitcoin has quadrupled - legions of investors and speculators have turned to online exchanges. Billions of dollars’ worth of bitcoins and other cryptocurrencies - which aren’t backed by any governments or central banks - are now traded on exchanges every day.

“These are new assets. No one really knows what to make of them,” said David L. Yermack, chairman of the finance department at New York University’s Stern School of Business. “If you’re a consumer, there’s nothing to protect you.”

Regulators and governments are still debating how to handle cryptocurrencies, and Yermack says the U.S. Congress will ultimately have to take action.

Some of the freewheeling exchanges are plagued with poor security and lack investor protections common in more regulated financial markets, Reuters found. Some Chinese exchanges have falsely inflated their trading volume to lure new customers, according to former employees.

There have been at least three dozen heists of cryptocurrency exchanges since 2011; many of the hacked exchanges later shut down. More than 980,000 bitcoins have been stolen, which today would be worth about $4 billion. Few have been recovered. Burned investors have been left at the mercy of exchanges as to whether they will receive any compensation.

Nearly 25,000 customers of Mt. Gox, once the world’s largest bitcoin exchange, are still waiting for compensation more than three years after its collapse into bankruptcy in Japan. The exchange said it lost about 650,000 bitcoins. Claims approved by the bankruptcy trustee total more than $400 million.

https://www.reuters.com/investigates/special-report/bitcoin-exchanges-risks/