Hackers steal nearly £31 million in Bitcoin from one of the largest cryptocurrency exchanges

With just a single transaction, hackers have stolen nearly £31 million ($40m) in Bitcoins from one of the world’s largest cryptocurrency trading companies.

The theft, which affected Binance, was carried out with a variety of methods that included phishing and viruses.

The hackers were able to withdraw 7,000 Bitcoin (£30.9m) by surpassing all the company’s security checks, said the company’s CEO. 

Chief Executive Changpang Zhao said that the amount taken made up ‘about 2%’ of Binance’s total Bitcoin holdings. 

Thousands of Bitcoin worth nearly £31m were stolen in a single transaction from one of the world's largest cryptocurrency exchanges Binance (Dominic Lipinski/PA)

Thousands of Bitcoin worth nearly £31m were stolen in a single transaction from one of the world's largest cryptocurrency exchanges Binance (Dominic Lipinski/PA)

Thousands of Bitcoin worth nearly £31m were stolen in a single transaction from one of the world’s largest cryptocurrency exchanges Binance (Dominic Lipinski/PA)

The Japan-based company’s chief executive Changpeng Zhao, known as CZ, said Binance will use its secure asset fund fully cover the incident and promised that it will conduct a  ‘thorough security review’.

The company however warned its account holders that the process will take around a week, during which time withdrawals and deposits will remain suspended, although trading could continue.

In a Twitter post, the CEO CZ wrote: ‘Not the best of days, but we will stay transparent.

Binance said hackers were able to withdraw 7,000 Bitcoin (£30.9m) in one transaction after using 'a variety of techniques, including phishing, viruses and other attacks'

Binance said hackers were able to withdraw 7,000 Bitcoin (£30.9m) in one transaction after using 'a variety of techniques, including phishing, viruses and other attacks'

Binance said hackers were able to withdraw 7,000 Bitcoin (£30.9m) in one transaction after using ‘a variety of techniques, including phishing, viruses and other attacks’ 

‘The hackers had the patience to wait, and execute well-orchestrated actions through multiple seemingly independent accounts at the most opportune time.

‘The transaction (was) structured in a way that passed our existing security checks.

‘It was unfortunate that we were not able to block this withdrawal before it was executed.

‘Once executed, the withdrawal triggered various alarms in our system. We stopped all withdrawals immediately after that.’

The theft is thought to only have affected the exchange’s ‘hot wallet’, which refers to a cache of Bitcoin connected to the internet.

THE SCALE OF CRYPTO FRAUD 

According to financial research firm Autonomous NEXT and Crypto Aware, which works with investors affected by crypto scams, about 15 per cent of cryptocurrencies have been stolen between 2012 and the first half of 2018.

This represents a cumulative $1.7 billion in value at the time of the theft and with a rising tendency. 

In the first half of this year alone, more than $800 million has already been stolen, according to the data.   

This is not the first time that unregulated crytocurrency market has been plagued by scams. 

On top of large-scale funnelling of bitcoins worth millions of dollars, which are relatively rare, criminals also target individuals using elaborate schemes. 

These often target multiple investors and average account holders.  

A report issued in October last year showed that in the first half of the year alone, more than $800 million were stolen in bitcoins.  

At the time, Patrick Wyman, FBI supervisory special agent at the financial crimes section of the agency’s anti-money laundering unit acknowledges cryptocurrencies pose some unique challenges.

Mr Wyman said: ‘A decentralized currency system like bitcoin, or another form of virtual currency is not governed by any entity, suspicious reporting activity, and any anti-money laundering compliance,’ Wyman told Reuters.

In the same month last year, a cryptocurrency scam tricked victims out of tens of thousands of dollars in Australia by getting them to use a bitcoin ATM.

Scammers convinced four victims from Melbourne’s eastern suburbs they owed a tax debt and needed to deposit the funds into one of the city’s few bitcoin ATMs.

They were told they would be arrested unless they deposited the money at a Bitcoin ATM in Braybrook – one of the few in Melbourne. 

Police said they believed the scam was targeting newly-arrived migrants who could be convinced their immigration status was in jeopardy.

Victims lost up to $50,000 in a bitcoin ATM scam in Melbourne, out of fears they will be arrested if they don't pay up (stock image)

Victims lost up to $50,000 in a bitcoin ATM scam in Melbourne, out of fears they will be arrested if they don't pay up (stock image)

Victims lost up to $50,000 in a bitcoin ATM scam in Melbourne, out of fears they will be arrested if they don’t pay up (stock image)

In November last year, over a dozen major Twitter accounts werehacked and turned into fake accounts claiming to belong to Elon Musk in a major bitcoin scam.

Famous publishing houses, clothing manufacturers and even accounts belonging to two members of Congress, Frank Pallone and Brenda Lawrence were taken over in the past few weeks, with more appearing today.

The hackers ‘cloned’ the account so it looks identical to the real Elon Musk’s accounts, even uploading the correct images and latest tweets.

Experts have previously warned about the dangers of any virtual currency system like the bitcoin that is not governed by the government or any central entity. 

They also say that the majority of thefts are left unreported, since investors’ faith in the encryption technology often makes them think that it allows criminals cover their tracks so effectively that it is impossible to try to catch them.

Lex Sokolin, a partner and global director of fintech strategy at the firm, estimates that as much as 85 per cent of crimes go unreported and says the published statistics only represent publicly reported heists. 

WHAT IS A BITCOIN? A LOOK AT THE DIGITAL CURRENCY

What is a Bitcoin?   

Bitcoin is what is referred to  as a ‘crypto-currency.’ 

It is the internet’s version of money – a unique pieces of digital property that can be transferred from one person to another.

Bitcoins are generated by using an open-source computer program to solve complex math problems. This process is known as mining.  

Each Bitcoin has it’s own unique fingerprint and is defined by a public address and a private key – or strings of numbers and letters that give each a specific identity.

They are also characterized by their position in a public database of all Bitcoin transactions known as the blockchain. 

The blockchain is maintained by a distributed network of computers around the world.

Because Bitcoins allow people to trade money without a third party getting involved, they have become popular with libertarians as well as technophiles, speculators — and criminals.

Where do Bitcoins come from?

People create Bitcoins through mining.

Mining is the process of solving complex math problems using computers running Bitcoin software.

These mining puzzles get increasingly harder as more Bitcoins enter circulation.

The rewards are cut in half at regular intervals due to a deliberate slowdown in the rate at which new Bitcoins enter circulation. 

Who’s behind the currency?

Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto and then adopted by a small clutch of enthusiasts.

Nakamoto dropped off the map as Bitcoin began to attract widespread attention, but proponents say that doesn’t matter: the currency obeys its own, internal logic.

Dr Craig Wright was suspected as the creator following a report by Wired last year and he has now confirmed his identity as the cryptocurrency’s founder.  

What’s a bitcoin worth?

Like any other currency, Bitcoins are only worth as much as you and your counterpart want them to be. 

Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration

Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration

Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration

In its early days, boosters swapped Bitcoins back and forth for minor favours or just as a game. 

One website even gave them away for free. 

As the market matured, the value of each Bitcoin grew.

Is the currency widely used?

That’s debatable.

Businesses ranging from blogging platform WordPress to retailer Overstock have jumped on the Bitcoin bandwagon amid a flurry of media coverage, but it’s not clear whether the currency has really taken off. 

On the one hand, leading Bitcoin payment processor BitPay works with more than 20,000 businesses – roughly five times more than it did last year. 

On the other, the total number of Bitcoin transactions has stayed roughly constant at between 60,000 and 70,000 per day over the same period, according to Bitcoin wallet site blockchain.info.

Is Bitcoin particularly vulnerable to counterfeiting?

The Bitcoin network works by harnessing individuals’ greed for the collective good. 

A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction. 

The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional Bitcoin. 

As long as miners keep the blockchain secure, counterfeiting shouldn’t be an issue.

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