Cryptsy Announces 1000 BTC Reward for Stolen Coins

Cryptsy is quickly capturing headlines and even being referred to as “the next Mt. Gox.” Things do not seem quite as simple as Cryptsy running away, as the unannounced vacating of their headquarters may have suggested. A new blog post from Cryptsy posted January 14^th, claims that the loss of funds did not result from a recent malicious or DDOS attack, nor malicious actions on the behalf of any of the Cryptsy staff, as well as a bounty of 1000 BTC “for information which leads to the recovery of the stolen coins.” Instead, the beginning of these problems happened a year and a half ago, and Cryptsy is no longer able to keep
themselves afloat.

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Claims of Theft

The posts details that after some investigation, the culprit seemed to be the developer of Lucky7Coin, which “had placed an IRC backdoor into the code of wallet.” Acting as a Trojan, it was suspected to lay dormant for months before it gained the necessary information to perform the attack.

According to the blog post, “about a year and a half ago, we were alerted in the early AM of a reduction in our safe/cold wallet balances of Bitcoin and Litecoin, as well as a couple other smaller cryptocurrencies”. In total, around 13,000 BTC and 300,000 LTC was taken, which alone is worth around $5.9 million USD at current market prices. Not to mention the “couple other cryptocurrencies”, which could lead to the total amount stolen being closer to $6 million.

Cryptsy, it seems, decided to keep things low-key. They planned to resolve the deficit using profits made from the exchange, and the reserve they still had of the cryptocurrencies. While this plan would have solved things over time and done it quietly to boot, a combination of low volume and low Bitcoin prices led to low profits that made this plan of resolution difficult to abide by.

“Some may ask why we didn’t report this to the authorities when this occurred, and the answer is that we just didn’t know what happened, didn’t want to cause panic, and were unsure who exactly we should be contacting.”

Cryptsy points to Coinfire’s article, which they claim contains many false accusations, being the final straw, leading to depleted reserves as everyone was trying to withdraw their money.

In Cryptsy’s current state, the most likely option is to file bankruptcy, but Cryptsy is not ruling out reacquiring the stolen funds to process withdrawals, nor someone else purchasing the exchange and making good on the withdrawal requests. Bitcoinist will keep you updated on any developments regarding the Cryptsy exchange.

Is Cryptsy going to end up like Mt. Gox? Have you lost money from the exchange? Let us know in the comments below!

Photos Courtesy of Cryptsy and PixaBay