LocalBitcoins Releases Investigation Report on Site Wallet Issues

Apr 18, 2014 at 5:00 p.m. UTC
Updated Sep 11, 2021 at 10:40 a.m. UTC

Following yesterday's statement from LocalBitcoins regarding issues with its wallet service, the website has released its follow-up investigation report.

The report focused in part on claims that the site's two-factor authentication failed to prevent a wallet breach. LocalBitcoins also addressed the cause of withdrawal delays that took place as users tried to move their bitcoins away from the site following the posting of user concerns on reddit.

The LocalBitcoins team wrote in the report's introduction:

"LocalBitcoins team did not found any evidence of compromised site security."

Report walks through hack claims

LocalBitcoins presented an activity timeline of user don4of4 (who initially posted on reddit), including 17th April when the wallet intrusion took place.

The site's team identified that unlike previous logins by the user, someone accessed the site via a Tor browser and had access to don4of4's two-factor authentication key generator.

LocalBitcoins surmised that whoever accessed the user's account had gained access to his mobile device, which don4of4 told the team was used to store the two-factor codes.

The report read:

"In this case if the user used this particular Android device to access LocalBitcoins and the device was compromised, the attacker gained access to user password, user session ID and two-factor codes. Furthermore, it was reported on the reddit that the credentials of this particular user have been found on known compromised user account lists spreading in the internet."

LocalBitcoins added that it does not currently offer session fixation as a security measure. However, the development team will look into the matter as a possible future offering for users.

LocalBitcoins addresses withdrawal problems

As stated previously, concerns regarding the site's integrity resulted in increased withdrawal traffic. Withdrawal delays led to increased anxiety among the site's users.

LocalBitcoins said in its report:

"When the LocalBitcoins hot wallet was being emptied due to high volume of withdraws, the withdraws started to delay. LocalBitcoins choose not to top up the hot wallet until the incident is investigated."

The site added that the majority of its bitcoins are in cold storage.

Wallet malware issues detailed

LocalBitcoin's initial 17th April statement suggested that a malware intrusion had resulted in the loss of some users' wallet credentials.

The investigation report elaborated on this point, saying:

"In all of these cases the user account had no two-factor authentication and had a login coming from an IP address not associated with the users prior behavior pattern. We believe this was an incident either with reused passwords or malware-infection on the use computer."

The report also recommended that all users adopt two-factor authentication for its account, saying that the site is unable to tell the difference between a user login and one from an unauthorised source.

Tough landscape for wallet owners

Malware targeting bitcoin wallets have increased in number significantly in the past year, posing problems for users who don't keep their bitcoins in cold storage.

A recent report by cybersecurity firm Kapersky Labs showed a sharp increase in bitcoin wallet intrusions and attempted intrusions in 2013, compared to 2012 levels.

A separate study conducted by digital security firm Dell SecureWorks found that nearly 150 strains of malware were currently circulating the internet as of February 2014.

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
CoinDesk - Unknown
Sequoia's Guide to Surviving the 2022 Bear Market

Venture capitalists have gotten increasingly frantic over the last few months.

Venture capitalists have gotten increasingly frantic over the last few months.

CoinDesk - Unknown
2
CoinDesk - Unknown
NFT Art Museums Are a Good Idea

The metaverse turns galleries global, and helps fund the arts. This article is part of “Metaverse Week."

The metaverse turns galleries global, and helps fund the arts. This article is part of “Metaverse Week."

CoinDesk - Unknown
3
CoinDesk - Unknown
How the US Can Establish Itself as a Crypto Leader

Regulators have an opportunity to map out thoughtful, strategic policy on stablecoins and beyond.

Regulators have an opportunity to map out thoughtful, strategic policy on stablecoins and beyond.

CoinDesk - Unknown
4
CoinDesk - Unknown
No, the UK Is Not Going to Make USDC and USDT Legal Tender

For “legalize” read “regulate.”

For “legalize” read “regulate.”

CoinDesk - Unknown