The emergence of cryptocurrency enabled folks to be their own bank, which means managing funds via cryptography to secure the private keys. It’s something that requires some level of proficiency with software as well as hardware tools.
Being their own bank doesn’t require much skill level as one is required to set up an account with a third party then use the provided password to access their funds.
That’s what crypto exchanges do, whereby they only store the key on your behalf and offer a user-friendly service much like traditional banking. Therefore, they’re the custodians of your funds, and the security of your funds depends on the exchange’s security measures.
Unfortunately, just like most technologies that involve public access to the databases and servers, they attract internal thefts, sophisticated hacks, and loss of user funds.
Since its introduction, cryptocurrency has not gained much adoption. Twelve years in technology are a long time, but what mostly keeps adoption at bay is merely the risk associated with these digital tokens.
In fact, there have been heists ever since crypto became worth a fortune. The massive and highly orchestrated attacks have led to millions worth of crypto changing hands. While the emergence of security tools like good crypto VPNs has helped people minimize risks while trading and holding crypto. They, unfortunately, just still keep happening!
So, how many heists? Now, just over the past few years, there have been six major heists. By major, it means probably hundreds of millions worth of Bitcoin getting lost.
If you might not have heard about those remarkable thefts, then here are the top 6 major crypto heists in history;
The Japanese crypto exchange and wallet Coincheck was the target of the attack on January 26, 2018, which turned out to be one of the remarkable heists in history.
The attack resulted in 500 million NEM (about $532 million) exchanging hands. The crypto exchange had only been operation since 2014, meaning it was new and its tech was just recently implemented. As a result, hackers sniffed that opportunity and caught the exchange short-staffed.
It was reported that hackers had sent malicious files to Coincheck employees that helped them to gain access to their infected systems. The malware that was discovered on the employee systems was associated with the Russian hacker groups. However, initially, it was linked with the Korean hacker group Lazarus.
Given the fiat equivalent when the hack took place, the Coincheck heist is presumably the largest crypto heist in history.
2. Mt. Gox
It caught the eye of almost everyone in the cryptocurrency community. It’s ideally the largest Bitcoin hack. Mt. Gox was founded in 2010, and at its peak around 2013 and 2014, it was controlling almost 70% of Bitcoin transactions.
During that heist, Mt. Gox lost almost 800,000 Bitcoins. The hack hasn’t been fully confirmed yet, but whether that was the case or not, it was enough that it made Mt. Gox go bankrupt thereafter.
It was reported that about 200,000 Bitcoins that were lost had been recovered, but due to the pending court cases and claims, they have not yet been returned to the owners.
Going by the daily trading volumes, the Hong Kong-based crypto exchange Bitfinex ranks highly. However, in August 2016, it suffered a major hack heist in which about 120,000 Bitcoins worth around $70 million were stolen. Currently, at present rates, the heist is worth well over $1.3 billion.
Interestingly, the heist was a single attack from the company’s wallets. Moreover, the company had set up precautions to avert such failure. Up to now, it’s not known the type of mechanisms that failed to allow the attackers to accomplish their mission successfully.
Later, Bitfinex offered users a novel solution, whereby they issued Bitfinex tokens (BFX) to affected users in a buyback scheme. The users could sell it immediately at a discount or simply wait for Bitfinex to eventually repurchase it. Within almost a year, the company had purchased almost all the issued tokens.
Up to now, Bitfinex is in operation and has been working with law agencies to recover the lost funds.
4. NiceHash Heist
If you thought that it’s only cryptocurrencies that are prone to hackers, you might have to reconsider. In December 2017, hackers stole up to 4,700 Bitcoins from the cryptocurrency mining firm, NiceHash.
It operates a marketplace whereby independent miners are able to rent their hash power to the users that don’t have the mining machines. Like most crypto-related companies, NiceHash used a combination of hot and cold wallets to store the funds for beneficiaries. Unfortunately, it was the wallets that the hackers focused on and emptied the balances of users.
Nonetheless, NiceHash has continued its operations with a reimbursement program, whereby up to date it has reimbursed more than 75% of the stolen funds to the users.
5. Zaif Heist
Another Japanese exchange, Zaif, fell victim to the hackers. During the attack, its 3 hot wallets were hit and they contained 3 different cryptocurrencies, namely Bitcoin, Bitcoin Cash, and Monacoin.
It was until the third day that the exchange realized that funds had been swiped from the hot wallets. About $62 million in fiat equivalent was lost during the heist.
Its parent company, Tech Bureau later confirmed the hack and announced that they would compensate customers who had lost their funds. Until now still, the hackers are at large.
It seems like no exchange is immune from hackers. In May 2019, Binance announced that some sophisticated fishing means had been used to swipe about 7,000 Bitcoin from its Bitcoin hot wallet.
As much as the funds were taken from the user accounts, the balances remained unaffected, thanks to the exchange’s ‘emergency fund’ that they had set for such scenarios. Trading was suspended for a week for a thorough security review.
Moreover, the CEO was as well as transparent as possible throughout the investigations, even writing a blog post to the users at that time to update them as well as creating an “Ask Me Anything” session on Twitter.
In conclusion, there’s no denying that more and more entities are working hard to make cryptocurrency trading secure, but perpetrators are equally on the lookout for loopholes for digital heists. Therefore, until such appropriations are down to manageable levels, folks will always be wary of cryptocurrency trading. Fortunately, there’s always room for improvement!