Bitcoin exchange shuts down after being hacked twice in one year

A South Korean Bitcoin exchange has collapsed after suffering its second hack in less than a year.

As The Telegraph reports, YouBit has announced that it suffered a hack at 04:35am local time today, which saw criminals steal 17% of its total assets.

As a consequence, YouBit has declared itself bankrupt and – by the time you read this article – will have shut down forever.

In an announcement to customers, YouBit said it would allow users to withdraw up to 75% of their funds. But customers will have to wait until after the bankruptcy process to see what (if any) of the remainder of their Bitcoin investments will be made available.

No doubt some observers will fail to feel much sympathy with investors who are stung by YouBit’s sudden and unexpected shutdown. After all, the same site suffered a separate hack in April which saw 4,000 Bitcoins stolen (worth about US $5.5 million then, but an eye-watering US $74 million at today’s prices).

To misquote Oscar Wilde, to have your Bitcoin exchange hacked once may be regarded as misfortune; to have it happen twice looks like carelessness.

In its message to customers, YouBit said that it had made efforts to improve security after the earlier attack, but it simply wasn’t enough.

[Emergency – Important]

I am very sorry to inform you again with the sad news.

After the accident in April, we have done our best to improve the security, recruitment and system maintenance, and have managed to lower the hot wallet rate.

Then, at 4:35 am, we lost our coin purse due to our hacking .

The coin loss at 4:35 am is about 17% of total assets. The other coins were kept in the cold wallet and there were no additional losses.

The April YouBit hack was blamed, like other attacks on cryptocurrency exchanges based in the country, on North Korea. The claim is that hackers working for North Korea have been exploiting digital currency exchanges to steal large amounts of money, and avoid sanctions.

With Bitcoin prices rocketing skywards no-one should be surprised to see an increasing interest amongst online criminals to steal wallets, and to target Bitcoin exchanges.

In the 1930s, gun-wielding bank robber Willie Sutton explained that the reason he targeted banks was because “that’s where the money is.”

Banks, however, have hundreds of years of experience in protecting their customers’ money and have typically invested heavily in defending themselves. Faced with such a hard target is it any wonder that online criminal gangs are finding relatively young, poorly protected, Bitcoin exchanges so attractive?

If you’re going to invest in Bitcoin, my advice is to keep your investments away from an online exchange as much as possible and invest in a hardware wallet instead.

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