Bitcoin Exchange Cryptsy Finally Explains Loss Of Millions

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by Tatsiana Yablonskaya · 3 min read
Bitcoin Exchange Cryptsy Finally Explains Loss Of Millions
Photo: Cryptsy

Cryptsy published a blog post with step-by-step explanation of conducted cyberattack.

Bitcoin exchange Cryptsy International has explained the problems it has been undergoing for some time in a blog post. Cryptsy completely denied all allegations that problems were caused by recent phishing attacks or a ddos attack. The exchange has been under investigation since a class action lawsuit against it was filed. First-hand explanation comes just in time as numerous users continue complaining of withdrawal issues and Cryptsy remaining silent.

Until the problems began, Cryptsy was a successful exchange with more than 270,000 registered users from all over the world making over 300k trades per day. It serviced more than 200 different types of crypto-currency.

Now the company is experiencing hard times. The suit for over $5 million USD was filed by Jinyao Liu who had deposited 84,000,000 Doge and tried to withdraw the cryptocurrency from the exchange. To be more exact, the suit against the exchange is represented by Liu and others suffering from the same hardship. They all cannot withdraw from Cryptsy, and the filings represent the interests and costs of many people throughout various states.

Cryptsy says that troubled started about a year and a half ago, when the team noticed a reduction in the safe/cold wallet balances of Bitcoin and Litecoin, as well as a couple other smaller cryptocurrencies. Investigation was conducted. After considering the results, Cryptsy concluded that the developer of Lucky7Coin had placed an IRC backdoor into the code of wallet. That allowed it to act as a sort of a Trojan, or command and control unit. This Trojan must have been present in the system for several months to collect enough information for the attack.

Soon Cryptsy received an e-mail from the new developer who wanted to maintain the codebase. However the management of the exchange didn’t take any measures. Afterwards they would say that “they just didn’t understand what had happened, didn’t want to cause panic and were unsure who exactly they should be contacting.”

At that time Cryptsy’s website was earning more than it was spending. The exchange had reserves of cryptocurrencies on hand so they just decided to pull from the profits to fill these wallets back up over time. This helped to avoid complete closure of the website.  Unfortunately without deep understanding of the very reason for what was going on, the measure helped just for a while. Further events unfolded after the publication of an article with many false accusations by Coinfire. The article basically caused a bank-run and this is where problems with customers’ complaints began.

Cryptsy informs that its current customer liabilities for BTC is around 10,000 BTC. It underlines that bitcoins have not moved once since this all happened which gives a hope to recover them.  A reward of 1000 BTC is offered for useful information which can help with the recovery of the stolen coins. Also Cryptsy provides an address for the perpetrator of the crime to return the cryptocurrency and guarantees that it will do no harm and will take no action to reveal his personality.

As for now the exchange sees three possible options:

  1. To shut down the website and file bankruptcy, letting users file claims via the bankruptcy process and letting the court make the disbursements.
  2. If somebody purchases and run Cryptsy while also making good on requested withdrawals.
  3. If somehow Cryptsy manages to re-aquire the stolen funds and allows all withdrawal requests to process.

Until Cryptsy comes to any sort of solution, trades and withdrawals on the site will be suspended.

Bitcoin News, Cryptocurrency News, News
Tatsiana Yablonskaya

Taking strong interest in blockchain, cryptocurrencies, and IoT, Tatsiana Yablonskaya got deep understanding of the emerging techs believing in their potential to drive the future.

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