August 17, 2019
Bitcoin has had its fair share of ups and downs since its advent 10 years ago, narrating a tale that ranges from spectacular market booms to downright debilitating hacks and security breaches that didn’t spare even the largest crypto exchange platforms. Today we shed light on the top 5 crypto exchange fiascos recorded till date:
2019: Quadriga Crypto’s CEO’s ‘Cold Wallets’ Found Empty
When Quadriga Fintech Solutions Corp.’s CEO Gerald Cotten died, there was a panic in the market on not being able to recover CAD $190 million ($143 million USD) of cryptocurrencies stored by him in the offline ‘cold storage.’ But as the situation developed, it was revealed that the storage Quadriga was using has been empty since April.
The Vancouver-based digital exchange, which already closed operations at the end of January, had six cold wallet addresses used to save bitcoins from hacking attacks. But it now appears that five of those wallets didn’t have any balances since April 2018, and the sixth “appears to have been used to receive Bitcoin from another cryptocurrency exchange account and subsequently transfer Bitcoin to the Quadriga hot wallet” on December 3.
A review of transactions of the six wallets shows that from April 2014 to approximately April 2018, the average Bitcoin month-end balances in the cold wallets ranged from zero to a peak of 2,776 Bitcoin, with an average month-end balance of approximately 124 Bitcoins over the last 4 years. Whether the crypto from these accounts was stolen or it was stored at another place remains a mystery for now, leaving 115,000 customers and about C$260 million in cash and cryptocurrencies in limbo.
2018 Coincheck Heist: The biggest exchange hack ever
The Japan-based exchange hack happened on January 26, 2018, which forced the exchange to suspend all deposits in NEM coins. After failing to hide the severity of the situation, NEM Foundation’s president Lon Wong eventually succumbed to the pressure and admitted that the exchange was hacked at around 3 AM local time. Hackers managed to steal a whopping 523 million NEM coins, worth around $534 million, in a series of several unauthorized transactions at the time; which made it the single biggest exchange heist in our history.
2016: Bitfinex losing a fortune
In a mysterious set of events, Bitfinex suffered a crippling loss in Bitcoin worth over $60 million. Bifinex’s own investigations did not detect any hackers and adding to the mystery, FBI revealed later in the year that over a million dollars in bitcoin went missing from the exchange account of a user. The stupendous loss remains an unsolved conundrum till date.
2014: The infamous Mt. Gox Incident
Once a global leader, the Japan-based bitcoin exchange ruled the roost with 70% of the world's trading volume. But the first signs of cracks appeared when a hacker in 2011 took control of a computer of an auditor at Mt. Gox and siphoned off an estimated $8.5 million worth in bitcoins.
Still reeling from the disaster and infamy, the company took a decisive blow in 2014, when the company suddenly stopped all bitcoin withdrawals cold-turkey to “investigate technical difficulties.” Later it was revealed that the company underwent a transaction malleability attack, which leveraged a bug in the bitcoin code to alter the transaction details and reprocess the transaction repeatedly.
The company soon filed for bankruptcy, and an independent audit revealed that the bitcoins were actually being stolen over a period of time, amounting to a total of 850,000 bitcoins worth $473 million at the time.