All Bitfinex Users to Lose 36% in ‘Shared Loss’ After Exchange’s Hack

| Updated
by Polina Chernykh · 3 min read
All Bitfinex Users to Lose 36% in ‘Shared Loss’ After Exchange’s Hack
Photo: Universitat Pompeu Fabra/Flickr

The Hong Kong-based digital currency exchange, which was hacked by anonymous criminals last week, said its clients will lose 36% of their bitcoin deposits.

On August 2, Bitfinex suffered a huge cyber attack which resulted in a loss of around $75 million or nearly 120,000 bitcoins. According to the exchange, the overall percentage of Bitfinex shared loss amounts to 36%.

On Sunday, Bitfinex stated it is going to share the stolen funds and added that all its customers, even those who weren’t directly affected by the attack, will be compensated.

“After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets. This is the closest approximation to what would happen in a liquidation context,” the company said in a blog post.

“Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067%. In a later announcement we will explain in full detail the methodology used to compute these losses.”

According to Bloomberg, the company’s representative noted on Reddit that Bitfinex shared loss of 36% “applies to all assets across the site, so everyone.” Earlier the exchange said that the loss applies only to customers who deposited bitcoin or were in the process of lending U.S. dollars for margin trading.

The company will replace the stolen funds with BFX tokens that will later be redeemed by the exchange. Bitfinex stated it is reviewing the possibility of exchanging the tokens for the stocks of iFinex Inc., the owner of Bitfinex.

“Tokens will be distributed without release or waiver. The BFX tokens will remain outstanding until redeemed in full by Bitfinex or possibly exchanged—upon the creditor’s request and Bitfinex’s acceptance—for shares of iFinex Inc.,” the company said.

Also, Bitfinex noted they are planning to partner with a number of investors in order to return the losses and is in active talks now. However, such negotiations are still in the early stage and will require time.

The exchange’s website started working on Monday, however, the trading, withdrawing and depositing functions are temporarily stopped. The company noted that more services will be restored in the next few days.

Last week, the price of bitcoin, as well as ether, fell by 30%, but increased to $599 shortly after the announcement on Sunday. Although bitcoin was the only cryptocurrency stolen, the exchange disabled trading in all virtual currencies.

In June, Bitfinex claimed it developed the most secure cryptocurrency wallet in partnership with bitcoin security firm BitGo. Using the unique multi-signature technology, the exchange offered its clients a new level of security, which appears to be compromised.

The theft showed once again that hacking attacks remain the main risk for the holders of digital currency. This is the biggest theft of bitcoin since 2014, when another major exchange Mt.Gox was hacked. At the time, the Japan-based exchange lost $350 million in bitcoins and filed for bankruptcy shortly after the theft.

Bitcoin News, Cryptocurrency News, News
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