BitFloor breached, hacker makes off with $250,000 in BitCoins

By Lee Kaelin on

The future of BitFloor, the largest BitCoin exchange in the United States, is uncertain after its founder announced yesterday that the company has suspended operations due to hackers compromising its server and making off with 24,000 BitCoins valued at around $250,000.

BitFloor has frozen all trades following the breach as a precaution and its website remains offline at the time of writing. The New York-based virtual currency exchange may have to shuts its doors permanently, though its owner Roman Shtylman says that's a last resort and he hopes investors are interested in his company.

Early investigations revealed that the hacker most likely stole the BitCoins after finding the corresponding wallet keys in a backup stored on an unencrypted area of the server's hard drive. Normally the "live keys" are stored on an encrypted area of the server's disk, and the company's founder realizes leaving them so exposed was a massive error of judgment.

He also reassured those trading with BitCoins that their data was safe. "I still have all of the logs for accounts, trades, and transfers. I know exactly how much each user currently has in their account for both USD and BTC. No records were lost in this attack."

While he agrees that the details surrounding the attack are interesting, he hopes the discussion in response to his announcement will focus on user accounts and the long-term fate of the exchange, which turns over around 64,000 BitCoins per month valued at around $717,000. The company takes a 0.3% commission from trades netting it around $2,100 in monthly revenue.

Because the currency uses a peer-to-peer format, it's very unlikely that the firm will its coins back, as transactions are irreversible. While it's often viewed as a key feature that protects merchants from chargebacks, it also exposes BitCoin users to hackers who can make off with the money if they get access to private keys. Hackers are increasingly using malware to steal BitCoins.

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