Bitcoin Heist: Two Major Thefts Tarnish Virtual Currency's Image

Image: Bitcoin Heist: Two Major Thefts Tarnish Virtual Currency's Image Protester Aaron holds a placard during a demonstration against Mt. Gox, in front of the building where the digital marketplace operator is housed, in Tokyo.

Tuesday, 25 Feb 2014 04:12 PM

By Clyde Hughes

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The virtual currency bitcoin has suffered a couple of major setbacks, including a heist where cyber criminals made off with $220,000 worth of cyber money and another when the Mt. Gox bitcoin exchange reported Tuesday the loss of another $365 million.

On Monday, the security firm Trustwave told Agence France-Presse a botnet of computers using malware dubbed "Pony" pulled off a $220,000 heist. The firm said that the Pony botnet affected and controlled an estimated 700,000 people or computers, giving the criminals the access to those accounts.

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"According to our data, the cyber gang that was operating this Pony botnet was active between September 2013 and mid-January 2014," researchers Daniel Chechik and Anat Davidi said in blog post, wrote AFP. They said the heist "collected approximately $220,000 worth, at time of writing, of virtual currencies such as Bitcoin, LiteCoin, FeatherCoin and 27 others."

PBS NewsHour reported Tuesday that Mt. Gox, the world's largest bitcoin exchange went offline Monday because of numerous problems, including a reported theft of hundreds of millions of dollars.

The incident has created doubts about bitcoin and other virtual currencies becoming legitimate long-term ways to move money in the marketplace.

Bitcoin entrepreneur Ryan Selkis published an 11-page "crisis strategy draft" in which he said the Tokyo-based Mt. Gox had lost 744,408 bitcoins, or roughly $365 million at Monday's prices, wrote PBS NewsHour.

PBS reported that the alleged hacking "went unnoticed for several years" causing roughly 6 percent of the 12.4 bitcoins in existence to disappear.

"In light of recent news reports and the potential repercussions on Mt. Gox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users," Mt. Gox posted on its website. "We will be closely monitoring the situation and will react accordingly."

Trustwave researchers told AFP that bitcoins are stored in what is called "virtual wallets, which are essentially pairs of private and public keys." Researchers told the news agency that whoever has those keys can take the money.

"Stealing bitcoins and exchanging them for another currency, even a regulated one such as U.S. dollars, is much easier than stealing money from a bank," Trustwave told AFP.

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