Gatecoin Claims $2 Million in Bitcoins and Ethers Lost in Security Breach

Stan Higgins
May 16, 2016 at 17:27 UTC
NEWS

News emerged last week of yet another security event in the digital currency exchange ecosystem, this time impacting a Hong Kong-based service involved in the sale of assets related to Ethereum-based decentralized autonomous organizations (DAOs).

As reported on Friday, Gatecoin experienced a cyberattack on its hot wallets that resulted in the loss of funds. A new update from the exchange team indicated that as much as $2m was lost, confirming rumors that circulated soon after the hack became apparent.

Gatecoin has claimed that it lost as much as 185,000 ethers and 250 bitcoins, an amount worth roughly $2.14m at press time. The exchange further said that it believes the hack first began on 9th May, and that it continued over the following three days.

While details remain unclear – Gatecoin has said that it is conducting an internal review of the incident – the company suggested in a statement on the hack that its process for storing funds offline had also been compromised.

Gatecoin said in a statement:

"We have previously communicated the fact that most clients’ crypto-asset funds are stored in multi-signature cold wallets. However, the malicious external party involved in this breach, managed to alter our system so that ETH deposit transfers by-passed the multi-sig cold storage and went directly to the hot wallet during the breach period. This means that losses of ETH funds exceed the 5% limit that we imposed on our hot wallets."

The timing of the hack was notable given the ongoing crowdsale for TheDAO, an organization using Ethereum-based tokens to vote on and fund development proposals. To date, that effort has raised approximately 10.72m ETH, worth nearly $120m at the time of this writing.

Gatecoin was one of several exchanges offering purchases of those tokens, and in the aftermath of the hack says that it will build a portal for withdrawing DAO-related tokens in the next two weeks, as well as fiat currencies.

No indication was given as to when withdrawals of bitcoin and ethers will be processed.

The Gatecoin incident represents the latest cybersecurity event in the exchange space, following hacks on ShapeShift and Cointrader, among others.

Image via Shutterstock

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