Never heard of this exchange, most of these little ones turn out to be a scam or have security problems.
Well, if you think of it, it's quite handy to lose the coins now, in the shadow of MtGox. But differently to MtGox they did not lose the cold wallet. So people having coins in cold wallet will get it back.
Here's their wiki entry:
https://en.bitcoin.it/wiki/Flexcoin
Also an interesting thing is that anybody running a Bitcoin exchange can claim that their money were lost, esp. from the hot wallet, without it being very easy to prove otherwise. Also it is very easy to rig it so that it seems a hacker stole everything, while in reality it is the operator and conspirators that conducted the theft.
It's sad for those genuine operators that genuinely tried their best and got robbed, but I would think that the majority of cases entails robbery done by insiders, and therefor very sharp light must be put on people running the exchange.
And asking law enforcement to help... Do law enforcement, apart from the most resourceful units actually have bitcoin competence?
They claim 896 btc is gone. That is about 0.6Million USD with todays exchange rate. Should be large enough to investigate by law enforcement, but I guess the specialist in any country have even bigger cases on their plate, so it's not sure it will be investigated by all, so some users got robbed, operators apparently appologize and everything blows over, and some person(s) now have significantly increased their wealth, be it the operator(s) or the thiefs.
A compromize of the web server should not mean the hot wallet is compromized, i would think that's standard security.
