VIRCUREX

DESCRIPTION OF EVENTS

"In 2014, the exchange reported it was near insolvency after losing large amounts of its reserve funds. According to the lawsuit, part of this loss came from “two purported hacks the exchange experienced in mid-2013.” Yet more of its reserve funds were depleted by large withdrawals by some of its customers." “The freeze will affect all bitcoin, litecoin, feathercoin and terracoin withdrawals. A message on Vircurex’s site says it will create a new balance type called ‘Frozen Funds’ covering all balances in the aforementioned currencies. The company maintains it won’t be shutting down, saying it intends to “gradually pay back the losses”.” “That Vircurex had a reserve shortfall had been known for some time, though not the exact amount. It froze BTC/LTC withdrawals in January 2013 after reporting that wallets had been compromised, but still allowed deposits in those currencies to continue.” “In a lawsuit filed in the U.S. District Court in Colorado, a former Vircurex customer accuses the exchange of breach of contract, conversion of funds, fraud and unjust enrichment. The suit explained how only a few of the account holders had received their funds after the exchange froze all withdrawals due to a claimed lack of reserves. At present, the frozen accounts contain a combined $50 million.” “Vircurex’s steps to prevent its customers from suing included stating it was incorporated in Belize, which it is not, as well as indicating it might be based in Beijing. The lawsuit states the exchange is actually based out of Germany, but has never been legally incorporated in any jurisdiction, meaning it is not recognized as a formal business by any government.”

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In the early days of exchanges, storage of funds in essentially hot wallets was incredibly common. With an anonymous exchange operator, once the hacks occurred, neither hack was revealed until far later. The exchange even lied about where they were based in an effort to prevent a lawsuit from occurring.

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List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses (Feb 15)
Former Customers Sue Crypto Exchange Vircurex Over Frozen Funds - CoinDesk (Feb 29)
Exchange Vircurex Freezes Withdrawals, Claims Lack of Reserves (Feb 29)
Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Mar 5)

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