After Mt. Gox, a Bitcoin Exchange, Now Bitcoin Bank Flexcoin Collapses

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After Mt. Gox, a Bitcoin Exchange, Now Bitcoin Bank Flexcoin Collapses
After Mt. Gox, a Bitcoin Exchange, Now Bitcoin Bank Flexcoin Collapses

After Mt. Gox, a Bitcoin Exchange, Now Bitcoin Bank Flexcoin Collapses

The last couple of weeks have not been good so far for Bitcoin as the digital currency’s processing services providers and bankers have been in a lot of trouble recently. First, it was Mt. Gox which collapsed last week and now, it is a Bitcoin bank Flexcoin which has fallen from grace as it lost each of its 896 Bitcoins valuing more than $600,000.

Flexcoin had to shut its operations after it came under a security breach that allowed thieves to steal all of its Bitcoins. The decision came from Flexcoin which realized that it failed miserably in protecting the Bitcoins it had stored in its servicers. The thief has transferred all the coins to two Bitcoin wallets. The attack did not come as shocker as the last couple of weeks have seen similar attacks.

Announcing the attack on March 2nd 2014 Flexcoin said that it was attacked and robbed of all coins in the hot wallet. The message also read that as Flexcoin does not have the resources, assets, or otherwise to come back from this loss, it is closing its doors immediately. However, the Bitcoin bank says that users who put their coins into cold storage will be contacted by Flexcoin and asked to verify their identity.

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The announcement further said that once identified; cold storage coins will be transferred out free of charge. It again looks a sound logic that cold storage is the best thing as here coins are held offline and not within reach of the attacker. At least, Flexcoin was able to protect some of its coins and in the announcement it said that it will attempt to work with law enforcement to trace the source of the hack.

The Failures May Prompt Governments to Interfere into Bitcoin Space

The blow came so heavy that Flexcoin could not stand now. In the announcement it said that it does not have the resources, assets, or otherwise to come back from this loss; therefore, it is closing its doors immediately. If such incidences keep happening, the governments may interfere which so far has been ruled out.

Nonetheless, if such attacks keep on happening, it will prompt governments take initiatives that ensure justice to the customers who lost their valuable investments. Mt. Gox gave a major jolt just the last week and now Flexcoin is sending tremors to Bitcoin investors. The much free space given to Bitcoin by governments may not be so free in the future.

To contact the reporter of this story: Deepak Tiwari at deepak@forexminute.com