Bitcoinica Hot Wallet Hack: Difference between revisions

From Quadriga Initiative Cryptocurrency Hacks, Scams, and Frauds Repository
Jump to navigation Jump to search
No edit summary
(30 minutes. Reviewing all the different sources, changing titles, and moving them to appropriate sections. Review the information on BitcoinTalk and reconciling the different loss amounts and dates of the incident. Added data from teh blockchain transaction.)
Line 1: Line 1:
{{Imported Case Study 2|source=https://www.quadrigainitiative.com/casestudy/bitcoinicahotwallethack.php}}
{{Case Study Under Construction}}{{Unattributed Sources}}[[File:Bitcoinica.jpg|thumb|Bitcoinica Logo/Homepage]]This shows a definite need for hot wallet insurance. Reduction in the level of funds stored in hot wallets would reduce the risk.
{{Unattributed Sources}}[[File:Bitcoinica.jpg|thumb|Bitcoinica Logo/Homepage]]This shows a definite need for hot wallet insurance. Reduction in the level of funds stored in hot wallets would reduce the risk.


This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand.<ref name="bitcoinmagazine-6" /><ref name="newsdotbitcoin-7" /><ref name="finextra-13" /><ref name="bitcointalklistold-20" /><ref name="bitcoinmagazine-23" /><ref name="bitcoinwiki-24" /><ref name="kylegibson-86" /><ref name="bitcointalklist-87" /><ref name="bitcoinexchangeguide-218" /><ref name="slowmisthacked-1160" />
This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand.<ref name="bitcointalklistold-20" /><ref name="bitcoinmagazine-23" /><ref name="bitcoinwiki-24" /><ref name="kylegibson-86" /><ref name="bitcointalklist-87" />


== About Bitcoinica ==
== About Bitcoinica ==
"Today, we have discovered a suspicious Bitcoin transaction that doesn't seem to be initiated by any one of the company owners..." speculation has been that A. Vinnik was involved (same as Mt Gox, BTC-e) “On May 6, 2012, bitcoin exchange Bitcoinica announced that their hot wallet had been hacked. The exchange told users that they had “discovered a suspicious bitcoin transaction that doesn’t seem to be initiated by any one of the company owners.” The hot wallet hack was initially suspected to be linked to Bitcoinica owner A. Vinnik, leading some to suspect it was an exit scam.”
The Bitcoinica exchange platform was based in New Zealand, and founded by Zhou Tong<ref name="bitcoinmagazine-23" />.<blockquote>Despite his position as the creator of a financial speculation service and his strong belief in libertarian capitalist ideals, Bitcoinica to him has never been about the profit. “Bitcoinica is not a money making machine,” he writes. “It’s just a product that sets a high standard for the Bitcoin community.”<ref name="bitcoinmagazine-23" /></blockquote>
 
This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand.
 
The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.
 
Include:
 
* Known history of when and how the service was started.
* What problems does the company or service claim to solve?
* What marketing materials were used by the firm or business?
* Audits performed, and excerpts that may have been included.
* Business registration documents shown (fake or legitimate).
* How were people recruited to participate?
* Public warnings and announcements prior to the event.
 
Don't Include:
* Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
* Anything that wasn't reasonably knowable at the time of the event.
There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.
 
== The Reality ==
== The Reality ==
This sections is included if a case involved deception or information that was unknown at the time. Examples include:
This sections is included if a case involved deception or information that was unknown at the time. Examples include:
Line 42: Line 21:
!Description
!Description
|-
|-
|May 1st, 2012 12:00:08 AM MDT
|May 6th, 2012
|Main Event
|Hot Wallet Hack Announced
|Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.
|“On May 6, 2012, bitcoin exchange Bitcoinica announced that their hot wallet had been hacked.”
|-
|May 12, 2012, 11:19:00 AM
|BitcoinTalk Reported Time
|The blockchain timestamp of the theft reported by BitcoinTalk, without any timezone being specified<ref name="bitcointalklistold-20" />.
|-
|May 12, 2012
|Bitcoin.com Date Reported
|"On May 12, 2012, a hacker breached the Bitcoinica Rackspace server, according to the now-defunct exchange’s founder Zhou Tong."<ref name="newsdotbitcoin-7" />
|-
|-
|
|August 13th, 2012 11:18:00 AM MDT
|
|Lawsuit Files Against Platform
|
|FinExtra reports that Bitcoinica faces a lawsuit from four former users who claim they are owed nearly $460,000 in missing funds and damages<ref name="finextra-13" />. Founded by teenager Zhou Tong, Bitcoinica suffered two hacking incidents earlier this year, resulting in the theft of thousands of Bitcoins worth tens of thousands of dollars. Despite assurances from Bitcoinica that the stolen funds were from the exchange itself, not customers, and promises to honor withdrawal requests, users allege only half of their money would be returned. With suspicions circulating that Tong might be involved in the hacks, the plaintiffs have filed a complaint in San Francisco against Bitcoinica, Intersango, and associated individuals, accusing them of conspiring to hinder and deprive the plaintiffs of their rights to the missing funds<ref name="finextra-13" />.
|-
|December 21st, 2012
|BitMarket.eu Funds Announced
|"On December 21, 2012, it was discovered that BitMarket.eu lost a large portion of customer funds which were stored on Bitcoinica. These customers were reportedly unaware that their funds were stored on Bitcoinica. Return of a portion of these funds is still possible, pending the outcome of liquidation."<ref name="bitcointalklistold-20" />
|-
|February 3rd, 2017 10:00:04 AM MST
|Bitcoin.com Article
|The incident is included with specific mention in a list of bitcoin thefts which you may have forgotten about, published by news site Bitcoin.com<ref name="newsdotbitcoin-7" />.
|}
|}


== Total Amount Lost ==
== Total Amount Lost ==
There are three different estimates of the amount lost in this case.
The first value of 18547.66867623 comes from the blockchain transaction<ref>[https://www.blockchain.com/explorer/transactions/btc/7a22917744aa9ed740faf3068a2f895424ed816ed1a04012b47df7a493f056e8 Bitcoinica Theft Transaction - Blockchain.com] (Accessed Apr 1, 2024)</ref>. This is included on some sites such as BitcoinTalk<ref name="bitcointalklistold-20" />.
BitMarket.eu had a liquidation, and in the legal paperwork, they reported about 19980 bitcoins<ref name="bitcointalklistold-20" />.
BitcoinTalk reported a total amount affected reported to be at least 38527 bitcoin<ref name="bitcointalklistold-20" />. This is very similar to an estimate on Bitcoin.com, which reported that the exchange lost over 38,000 BTC during the spring incident, which refers to an event that breached Bitcoinica's rackspace servers on May 12th, 2012<ref name="newsdotbitcoin-7" />.
The total amount lost has been estimated at $91,000 USD.
The total amount lost has been estimated at $91,000 USD.


How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?
== Immediate Reactions ==
 


== Immediate Reactions ==
“On May 6, 2012, bitcoin exchange Bitcoinica announced that their hot wallet had been hacked. The exchange told users that they had “discovered a suspicious bitcoin transaction that doesn’t seem to be initiated by any one of the company owners.” The hot wallet hack was initially suspected to be linked to Bitcoinica owner A. Vinnik, leading some to suspect it was an exit scam.”
How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?
 
 
"Today, we have discovered a suspicious Bitcoin transaction that doesn't seem to be initiated by any one of the company owners..." speculation has been that A. Vinnik was involved (same as Mt Gox, BTC-e)  


== Ultimate Outcome ==
== Ultimate Outcome ==
What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?
What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?
=== Lawsuit Against Platform ===
Finextra reports that four former users of Bitcoinica have filed a lawsuit alleging that they are owed nearly half a million dollars in missing funds, as well as damages<ref name="finextra-13" />. Bitcoinica, once a successful exchange created by teenager Zhou Tong, suffered two major hacking incidents earlier this year, resulting in the theft of thousands of Bitcoins. Despite assurances from Bitcoinica that the stolen funds were from the exchange itself and not customers, the site has remained offline, leaving users uncertain about the fate of their investments. Additionally, Bitcoinica had initially promised to honor all withdrawal requests but later informed users that only half of their funds would be returned, prompting speculation about the exchange's integrity. Amidst rumors implicating Tong in the hacks, the plaintiffs filed a complaint in San Francisco alleging that Bitcoinica, its successor Intersango, and associated individuals conspired to deprive them of their rights regarding the missing funds<ref name="finextra-13" />.
=== Inclusion In Incident Lists ===
This incident was included in many sources, including:
* a Bitcoin Magazine infographic<ref name="bitcoinmagazine-6" /> (along with another Bitcoinica theft).
* Bitcoin.news lists this as one of the most controversial in the industry<ref name="newsdotbitcoin-7" />.
* Bitcoin Exchange Guide<ref name="bitcoinexchangeguide-218" />.
* Slowmist<ref name="slowmisthacked-1160" />.


== Total Amount Recovered ==
== Total Amount Recovered ==
Line 87: Line 106:


== References ==
== References ==
<references><ref name="bitcoinmagazine-6">[https://bitcoinmagazine.com/articles/infographic-overview-compromised-bitcoin-exchange-events Infographic: An Overview of Compromised Bitcoin Exchange Events] (Jan 30, 2020)</ref>
<references>
 
<ref name="bitcoinmagazine-6">[https://bitcoinmagazine.com/articles/infographic-overview-compromised-bitcoin-exchange-events Infographic: An Overview of Compromised Bitcoin Exchange Events] (Jan 30, 2020)</ref>
<ref name="newsdotbitcoin-7">[https://news.bitcoin.com/bitcoin-exchange-thefts-forgotten/ The Bitcoin Exchange Thefts You May Have Forgotten | Featured Bitcoin News] (Jan 29, 2020)</ref>
<ref name="newsdotbitcoin-7">[https://news.bitcoin.com/bitcoin-exchange-thefts-forgotten/ The Bitcoin Exchange Thefts You May Have Forgotten - Bitcoin.com] (Jan 29, 2020)</ref>
 
<ref name="finextra-13">[https://www.finextra.com/newsarticle/23973/users-sue-bitcoin-exchange-over-460k-in-missing-funds Users sue Bitcoin exchange over $460k in missing funds - FinExtra] (Feb 3, 2020)</ref>
<ref name="finextra-13">[https://www.finextra.com/newsarticle/23973/users-sue-bitcoin-exchange-over-460k-in-missing-funds Users sue Bitcoin exchange over $460k in missing funds] (Feb 3, 2020)</ref>
<ref name="bitcointalklistold-20">[https://bitcointalk.org/index.php?topic=83794.msg923918#post_toc_27 <nowiki>List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses [Old] - BitcoinTalk</nowiki>] (Jan 28, 2020)</ref>
 
<ref name="bitcoinmagazine-23">[https://bitcoinmagazine.com/articles/bitcoinica_an_obituary-1336979566 Bitcoinica: An Obituary - Bitcoin Magazine] (Accessed Feb 4, 2020)</ref>
<ref name="bitcointalklistold-20">[https://bitcointalk.org/index.php?topic=83794.msg923918#post_toc_27 <nowiki>List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses [Old]</nowiki>] (Jan 28, 2020)</ref>
 
<ref name="bitcoinmagazine-23">[https://bitcoinmagazine.com/articles/bitcoinica_an_obituary-1336979566 Bitcoinica: An Obituary] (Feb 4, 2020)</ref>
 
<ref name="bitcoinwiki-24">[https://en.bitcoin.it/wiki/Bitcoinica Bitcoinica - Bitcoin Wiki] (Feb 4, 2020)</ref>
<ref name="bitcoinwiki-24">[https://en.bitcoin.it/wiki/Bitcoinica Bitcoinica - Bitcoin Wiki] (Feb 4, 2020)</ref>
<ref name="kylegibson-86">[https://medium.com/@kylegibson/100-crypto-thefts-a-timeline-of-hacks-glitches-exit-scams-and-other-lost-cryptocurrency-873c87fd5522 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents] (Jan 25, 2020)</ref>
<ref name="kylegibson-86">[https://medium.com/@kylegibson/100-crypto-thefts-a-timeline-of-hacks-glitches-exit-scams-and-other-lost-cryptocurrency-873c87fd5522 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents] (Jan 25, 2020)</ref>
<ref name="bitcointalklist-87">[https://bitcointalk.org/index.php?topic=576337 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses] (Feb 15, 2020)</ref>
<ref name="bitcointalklist-87">[https://bitcointalk.org/index.php?topic=576337 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses] (Feb 15, 2020)</ref>
<ref name="bitcoinexchangeguide-218">[https://bitcoinexchangeguide.com/bitcoin/scams-hacks/ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com] (Mar 5, 2020)</ref>
<ref name="bitcoinexchangeguide-218">[https://bitcoinexchangeguide.com/bitcoin/scams-hacks/ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com] (Mar 5, 2020)</ref>
 
<ref name="slowmisthacked-1160">[https://hacked.slowmist.io/en/?c=Exchange SlowMist Hacked - SlowMist Zone] (Jun 26, 2021)</ref>
<ref name="slowmisthacked-1160">[https://hacked.slowmist.io/en/?c=Exchange SlowMist Hacked - SlowMist Zone] (Jun 26, 2021)</ref></references>
</references>

Revision as of 15:02, 1 April 2024

Notice: This page is a new case study and some aspects have not been fully researched. Some sections may be incomplete or reflect inaccuracies present in initial sources. Please check the References at the bottom for further information and perform your own additional assessment. Please feel free to contribute by adding any missing information or sources you come across. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Notice: This page contains sources which are not attributed to any text. The unattributed sources follow the initial description. Please assist by visiting each source, reviewing the content, and placing that reference next to any text it can be used to support. Feel free to add any information that you come across which isn't present already. Sources which don't contain any relevant information can be removed. Broken links can be replaced with versions from the Internet Archive. See General Tutorial on Wikis, Anatomy of a Case Study, and/or Citing Your Sources Guide for additional information. Thanks for your help!

Bitcoinica Logo/Homepage

This shows a definite need for hot wallet insurance. Reduction in the level of funds stored in hot wallets would reduce the risk.

This exchange or platform is based in New Zealand, or the incident targeted people primarily in New Zealand.[1][2][3][4][5]

About Bitcoinica

The Bitcoinica exchange platform was based in New Zealand, and founded by Zhou Tong[2].

Despite his position as the creator of a financial speculation service and his strong belief in libertarian capitalist ideals, Bitcoinica to him has never been about the profit. “Bitcoinica is not a money making machine,” he writes. “It’s just a product that sets a high standard for the Bitcoin community.”[2]

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

  • When the service was actually started (if different than the "official story").
  • Who actually ran a service and their own personal history.
  • How the service was structured behind the scenes. (For example, there was no "trading bot".)
  • Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Bitcoinica Hot Wallet Hack
Date Event Description
May 6th, 2012 Hot Wallet Hack Announced “On May 6, 2012, bitcoin exchange Bitcoinica announced that their hot wallet had been hacked.”
May 12, 2012, 11:19:00 AM BitcoinTalk Reported Time The blockchain timestamp of the theft reported by BitcoinTalk, without any timezone being specified[1].
May 12, 2012 Bitcoin.com Date Reported "On May 12, 2012, a hacker breached the Bitcoinica Rackspace server, according to the now-defunct exchange’s founder Zhou Tong."[6]
August 13th, 2012 11:18:00 AM MDT Lawsuit Files Against Platform FinExtra reports that Bitcoinica faces a lawsuit from four former users who claim they are owed nearly $460,000 in missing funds and damages[7]. Founded by teenager Zhou Tong, Bitcoinica suffered two hacking incidents earlier this year, resulting in the theft of thousands of Bitcoins worth tens of thousands of dollars. Despite assurances from Bitcoinica that the stolen funds were from the exchange itself, not customers, and promises to honor withdrawal requests, users allege only half of their money would be returned. With suspicions circulating that Tong might be involved in the hacks, the plaintiffs have filed a complaint in San Francisco against Bitcoinica, Intersango, and associated individuals, accusing them of conspiring to hinder and deprive the plaintiffs of their rights to the missing funds[7].
December 21st, 2012 BitMarket.eu Funds Announced "On December 21, 2012, it was discovered that BitMarket.eu lost a large portion of customer funds which were stored on Bitcoinica. These customers were reportedly unaware that their funds were stored on Bitcoinica. Return of a portion of these funds is still possible, pending the outcome of liquidation."[1]
February 3rd, 2017 10:00:04 AM MST Bitcoin.com Article The incident is included with specific mention in a list of bitcoin thefts which you may have forgotten about, published by news site Bitcoin.com[6].

Total Amount Lost

There are three different estimates of the amount lost in this case.

The first value of 18547.66867623 comes from the blockchain transaction[8]. This is included on some sites such as BitcoinTalk[1].

BitMarket.eu had a liquidation, and in the legal paperwork, they reported about 19980 bitcoins[1].

BitcoinTalk reported a total amount affected reported to be at least 38527 bitcoin[1]. This is very similar to an estimate on Bitcoin.com, which reported that the exchange lost over 38,000 BTC during the spring incident, which refers to an event that breached Bitcoinica's rackspace servers on May 12th, 2012[6].


The total amount lost has been estimated at $91,000 USD.

Immediate Reactions

“On May 6, 2012, bitcoin exchange Bitcoinica announced that their hot wallet had been hacked. The exchange told users that they had “discovered a suspicious bitcoin transaction that doesn’t seem to be initiated by any one of the company owners.” The hot wallet hack was initially suspected to be linked to Bitcoinica owner A. Vinnik, leading some to suspect it was an exit scam.”


"Today, we have discovered a suspicious Bitcoin transaction that doesn't seem to be initiated by any one of the company owners..." speculation has been that A. Vinnik was involved (same as Mt Gox, BTC-e)

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?


Lawsuit Against Platform

Finextra reports that four former users of Bitcoinica have filed a lawsuit alleging that they are owed nearly half a million dollars in missing funds, as well as damages[7]. Bitcoinica, once a successful exchange created by teenager Zhou Tong, suffered two major hacking incidents earlier this year, resulting in the theft of thousands of Bitcoins. Despite assurances from Bitcoinica that the stolen funds were from the exchange itself and not customers, the site has remained offline, leaving users uncertain about the fate of their investments. Additionally, Bitcoinica had initially promised to honor all withdrawal requests but later informed users that only half of their funds would be returned, prompting speculation about the exchange's integrity. Amidst rumors implicating Tong in the hacks, the plaintiffs filed a complaint in San Francisco alleging that Bitcoinica, its successor Intersango, and associated individuals conspired to deprive them of their rights regarding the missing funds[7].

Inclusion In Incident Lists

This incident was included in many sources, including:

  • a Bitcoin Magazine infographic[9] (along with another Bitcoinica theft).
  • Bitcoin.news lists this as one of the most controversial in the industry[6].
  • Bitcoin Exchange Guide[10].
  • Slowmist[11].

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

This is a case where simply knowing who's holding the funds and storing them properly offline with multiple signatures would have avoided the issues.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.

References

  1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses [Old] - BitcoinTalk (Jan 28, 2020)
  2. ↑ 2.0 2.1 2.2 Bitcoinica: An Obituary - Bitcoin Magazine (Accessed Feb 4, 2020)
  3. ↑ Bitcoinica - Bitcoin Wiki (Feb 4, 2020)
  4. ↑ 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents (Jan 25, 2020)
  5. ↑ List of Major Bitcoin Heists, Thefts, Hacks, Scams, and Losses (Feb 15, 2020)
  6. ↑ 6.0 6.1 6.2 6.3 The Bitcoin Exchange Thefts You May Have Forgotten - Bitcoin.com (Jan 29, 2020)
  7. ↑ 7.0 7.1 7.2 7.3 Users sue Bitcoin exchange over $460k in missing funds - FinExtra (Feb 3, 2020)
  8. ↑ Bitcoinica Theft Transaction - Blockchain.com (Accessed Apr 1, 2024)
  9. ↑ Infographic: An Overview of Compromised Bitcoin Exchange Events (Jan 30, 2020)
  10. ↑ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Mar 5, 2020)
  11. ↑ SlowMist Hacked - SlowMist Zone (Jun 26, 2021)
Retrieved from "https://quadrigainitiative.com/cryptocurrencyhackscamfraudwiki/index.php?title=Bitcoinica_Hot_Wallet_Hack&oldid=5594"