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Bitcoin bank Flexcoin shuts down after hack

The Canadian Bitcoin bank goes offline after hackers steal 896 bitcoins -- valued at more than $580,000 -- through a flaw with the Web site.


Bitcoin is going through a bit of a rough patch. Just over a week after Bitcoin exchange Mt. Gox filed for bankruptcy, Bitcoin bank Flexcoin shut down after hackers stole all of its digital currency.

Hackers stole 896 bitcoins -- worth more than $580,000 based on Bitcoin's current trading value -- in an attack on Sunday, according to a note posted on the Canadian bank's site. Flexcoin decided to close its doors, saying it did not have "the resources, assets, or otherwise to come back from this loss."

Flexcoin offered more details on exactly how the hackers managed to steal the digital currency in an update posted Wednesday:

The attacker logged into the flexcoin front end from IP address under a newly created username and deposited to address 1DSD3B3uS2wGZjZAwa2dqQ7M9v7Ajw2iLy

The coins were then left to sit until they had reached 6 confirmations.

The attacker then successfully exploited a flaw in the [front-end] code which allows transfers between flexcoin users. By sending thousands of simultaneous requests, the attacker was able to "move" coins from one user account to another until the sending account was overdrawn, before balances were updated.

This was then repeated through multiple accounts, snowballing the amount, until the attacker withdrew the coins.

Flexcoin said bitcoins that were held offline, or in "cold storage," were not affected by the hack, and users could transfer out their bitcoins free of charge. Everyone else was pointed to a "Terms of service" document, which states that Flexcoin is not responsible for insuring bitcoins stored in its system. In other words, they won't be getting any of their digital currency back.

While Bitcoin continues to have staunch defenders, this latest hack will certainly add to concerns over the digital currency. Prominent exchange Mt. Gox went offline early last month and then filed for bankruptcyafter it was revealed that hackers stole nearly 850,000 bitcoins through a weakness in the Tokyo-based company's system. This has reportedly spurred the Japanese government to start outlining policies regulating the virtual currency. Here in the US, Sen. Joe Machin called on the government to issue an outright Bitcoin ban.