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<\/a><\/div><\/div>The rise of cryptocurrencies gave people the option to \u201cbe their own \nbank.\u201d Only software, or in some cases just a piece of paper, is needed \nto securely store any amount, no matter how high. Balances are easy to \naudit, hard to steal and trivial to transfer. So why do users of \ncryptocurrencies instead store their \u2018coins\u2019 with exchanges, which carry\n all the downsides of banks (you have to trust them) with none of the \nupsides (exchanges are not backed or insured by the government)? <\/p>\n\n\n\n
When storing your crypto with an exchange, you have to trust the \nexchange with not running afoul of the law, its executives with not \nrunning away with your money, and its security policies with protecting \nyour property from hackers.<\/p>\n\n\n\n
It\u2019s easy to see why crypto heists capture the public imagination. \nFirst, there\u2019s the sheer amount of money to be pilfered\u2014legacy banking \ninstitutions rarely get robbed of such vast amounts of money. Secondly, \ncryptocurrencies have only recently started to pique the public \ninterest, so any hack invariably makes the news. On top of that, the \nmoney is very hard to trace, making its theft something of a perfect \ncrime.<\/p>\n\n\n\n
With all that laid out, let\u2019s take a look at the biggest cryptocurrency heists of all time.<\/p>\n\n\n\n
1. Coincheck<\/h2>\n\n\n\n
Japanese crypto exchange Coincheck was hacked to the tune of 500 \nmillion NEM (or about 532 million USD) in January 2018. While Coincheck \nitself had been in operation since 2014, the currency in question, NEM, \nand its cold wallet hadn\u2019t been set up properly. <\/p>\n\n\n\n
The hack was initially blamed on state-sponsored operatives from North Korea, but it was later revealed<\/a>\n that the attack possibly had Russian origins. Personal laptops of some \nof the exchange\u2019s employees were infected with malware, with the hackers\n able to exploit system vulnerabilities after gaining access. <\/p>\n\n\n\n To the surprise of most observers, Coincheck was able to make its \ncustomers whole again, using the massive profits it had amassed in the \nprocess. It did however inspire Japan\u2019s financial regulator to further \nrestrict its nascent exchange ecosystem.<\/p>\n\n\n\n The Coincheck hack is the largest cryptocurrency heist in history, judging by the fiat equivalent at the time. <\/p>\n\n\n\n The Mt. Gox hack reverberated throughout global crypto communities \nand for good reason. It is still not entirely clear how many attackers \nwere able to steal exactly how much, but we do know that a vulnerability\n that allowed users to withdraw more Bitcoin than they owned persisted \nfor quite some time. Mt. Gox had a massive market share around the time \nit collapsed, and was the dominant exchange with up to 90% of all trades\n happening on its platform in the years prior.<\/p>\n\n\n\n Initially the company declared a loss of 850,000 Bitcoin, worth about 450 million USD at the time.<\/p> Mt. Gox was initially set up by Jed McCaleb as a place to trade \nin-game tokens. The exchange was upgraded to include Bitcoin after \nMcCaleb noticed the currency\u2019s growing popularity and wanted to help \ntraders. However, it never reached the levels of sophistication required\n to enable secure transactions. As Bitcoin trading levels grew, the \nactivity didn\u2019t go unnoticed by hackers.<\/p>\n\n\n\n About 200,000 of the Bitcoin initially reported lost have been \nrecovered, but pending court cases and claims have prevented their \nreturn to the rightful owners. <\/p>\n\n\n\n The Bitfinex hack was first announced in August 2016 and involved a \ntotal of about 120,000 Bitcoin, representing a fiat equivalent of 72 \nmillion USD at the time. Unlike with Mt. Gox, the coins were stolen in a\n single attack out of the company\u2019s wallets, despite them having set up \nsome precautions to prevent such failure. It is still unclear how and \nwhich mechanisms failed and allowed the attackers to get away with such a\n heist.<\/p>\n\n\n\n Bitfinex offered to compensate its users using an \u2018IOU\u2019 in the form \nof a token. Token holders could immediately sell it at a discount or \nwait until Bitfinex could buy it back using business profits.Within a \nyear, Bitfinex had purchased about 95% of all issued tokens. <\/p>\n\n\n\n Bitfinex continues to operate to this day. In July 2019, two Israelis were arrested on suspicion of having carried out the hack.<\/p>\n\n\n\n Occupying a place on our list is NiceHash, which was defrauded of \n4,700 Bitcoin (or about 64 million USD) in December 2017. NiceHash was a\n Slovenian cryptocurrency mining marketplace, where independent miners \ncould rent out hash power to users who didn\u2019t have their own mining \nmachines.<\/p>\n\n\n\n NiceHash operated a number of hot and cold wallets to distribute \nmining rewards among its members. It was these wallets that were \ntargeted, but despite the large number of funds lost, NiceHash has been \nable to reimburse over 75% of all losses. <\/p>\n\n\n\n Zaif was plundered of various cryptocurrencies, including Bitcoin, \nBitcoin Cash, and Monacoin, losing about 62 million USD in fiat \nequivalent in September 2018.<\/p>\n\n\n\n It took the exchange three days to realize that funds were missing \nfrom its hot wallets, but it promptly announced that company funds would\n be used to compensate all customers. <\/p>\n\n\n\n Hackers swiped 7,000 Bitcoin from Binance, one of the world\u2019s most \npopular crypto exchanges, in May 2019. The amount totaled about 40 \nmillion USD in equivalent fiat. Binance was able to reimburse its users \nwith a dedicated \u2018insurance fund\u2019 set up for this purpose. Withdrawals, \nhowever, were suspended for a few days as the exchange tried to figure \nout what went wrong. The CEO, Zhao Changpeng, wrote a comprehensive blog post<\/a>\n outlining the attack and engaged in a Twitter exchange to allay user \nconcerns, pre-empting concerns raised especially during the Mt. Gox and \nBitfinex crises.<\/p>\n\n\n\n Unlike with traditional banks, there is no need for cryptocurrency holders to keep their coins on an exchange. Instead, they can store them in a wallet on their phone or a dedicated device. Bitcoin likely still will be around in five to ten years, but the exchange of your choice will not be.<\/p>\n\n\n\n2. Mt. Gox<\/h2>\n\n\n\n
<\/a><\/div><\/div>\n\n\n\n3. Bitfinex<\/h2>\n\n\n\n
4. NiceHash<\/h2>\n\n\n\n
5. Zaif<\/h2>\n\n\n\n
6. Binance<\/h2>\n\n\n\n
Never store your coins on an exchange<\/h2>\n\n\n\n
More Information<\/h2>\n\n\n\n
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