Gatecoin Hack: Difference between revisions

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(30 minutes. About section information integrated. Reviewing and integrating sources. Integrating information from TheNextWeb article on final liquidation. Also integrated information from CoinDesk and CoinTelegraph sources. Lots of new sources found too.)
(30 minutes. Cleaning up template information on wiki page. Kyle Gibson integrated fully. Integrated extensive information from the May 16th CoinDesk article. Integration of information from Reddit official statement. Rewriting of amount lost. Revision of various sections based on Reddit article.)
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Gatecoin was one of the first regulated digital asset exchanges. This didn’t stop the hack of 185,000 ETH and 250 BTC. According to a forensic analysis, the exchange may have been the victim of a man-in-the-middle attack. The malicious external party involved in this breach managed to alter their system so that BTC and ETH deposit transfers bypassed the multisig cold storage and went directly to the hacker’s hot wallet during the breach period. The company fired their CTO, managed to raise $500k in order to reopen, and ultimately repaid all customers. They were saved by maintaining large cold wallet reserves which appear to have been properly stored, and appear to have dealt with the issue transparently. Having hot wallet insurance would have further assisted with the recovery; however a system like Proof of Reserves or an automated alert system could have allowed the issue to be noted sooner.
Gatecoin was one of the first regulated digital asset exchanges. This didn’t stop the hack of 185,000 ETH and 250 BTC. According to a forensic analysis, the exchange may have been the victim of a man-in-the-middle attack. The malicious external party involved in this breach managed to alter their system so that BTC and ETH deposit transfers bypassed the multisig cold storage and went directly to the hacker’s hot wallet during the breach period. The company fired their CTO, managed to raise $500k in order to reopen, and ultimately repaid all customers. They were saved by maintaining large cold wallet reserves which appear to have been properly stored, and appear to have dealt with the issue transparently. Having hot wallet insurance would have further assisted with the recovery; however a system like Proof of Reserves or an automated alert system could have allowed the issue to be noted sooner.


This exchange or platform is based in Hong Kong, or the incident targeted people primarily in Hong Kong.<ref name="kylegibson-86" /><ref>https://www.coindesk.com/gatecoin-2-million-bitcoin-ether-security-breach</ref><ref>https://www.reddit.com/r/gatecoin/comments/4jb1la/official_statement_regarding_gatecoin_hot_wallet/</ref><ref>https://cointelegraph.com/news/banks-shun-bitcoin-in-hong-kong-businesses-seek-foreign-help</ref><ref>https://www.scmp.com/news/hong-kong/economy/article/2120506/hong-kongs-bitcoin-businesses-suffer-after-local-bank</ref><ref>https://cointelegraph.com/news/gatecoin-launches-bitcoin-exchange-with-segregated-bank-accounts</ref><ref>https://gatecoin.com/</ref><ref>https://www.bloomberg.com/news/articles/2019-03-03/why-crypto-companies-still-can-t-open-checking-accounts</ref><ref>https://www.reddit.com/r/gatecoin/comments/b0pe1i/gatecoin_liquidated/</ref>
This exchange or platform is based in Hong Kong, or the incident targeted people primarily in Hong Kong.<ref name=":0">[https://www.reddit.com/r/gatecoin/comments/4jb1la/official_statement_regarding_gatecoin_hot_wallet/ OFFICIAL STATEMENT REGARDING GATECOIN HOT WALLET BREACH - Reddit] (Accessed Apr 2, 2024)</ref><ref>https://cointelegraph.com/news/banks-shun-bitcoin-in-hong-kong-businesses-seek-foreign-help</ref><ref>https://www.scmp.com/news/hong-kong/economy/article/2120506/hong-kongs-bitcoin-businesses-suffer-after-local-bank</ref><ref>https://cointelegraph.com/news/gatecoin-launches-bitcoin-exchange-with-segregated-bank-accounts</ref><ref>https://gatecoin.com/</ref><ref>https://www.bloomberg.com/news/articles/2019-03-03/why-crypto-companies-still-can-t-open-checking-accounts</ref><ref>https://www.reddit.com/r/gatecoin/comments/b0pe1i/gatecoin_liquidated/</ref><ref>https://www.coindesk.com/markets/2016/05/13/digital-currency-exchange-gatecoin-offline-after-loss-of-funds/</ref><ref>https://twitter.com/Gatecoin/status/732136409650208768</ref><ref>https://np.reddit.com/r/ethereum/comments/4oxog1/gatecoins_hacked_ether_addresses_are_known_do_we/</ref>


== About Gatecoin ==
== About Gatecoin ==
Established in 2013 in Hong Kong, Gatecoin primarily focused on Bitcoin and Ethereum markets<ref name="thenextweb-16" />.
Established in 2013 in Hong Kong, Gatecoin primarily focused on Bitcoin and Ethereum markets<ref name="thenextweb-16" />.


This exchange or platform is based in Hong Kong, or the incident targeted people primarily in Hong Kong.
Aurélien Menant was the current CEO at the time of the incident<ref name=":0" />.
 
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 ==
Line 42: Line 25:
!Event
!Event
!Description
!Description
|-
|May 9th, 2016
|Breach Begin
|The reported date that that breach began<ref name=":0" /><ref name=":1">[https://www.coindesk.com/gatecoin-2-million-bitcoin-ether-security-breach Gatecoin Claims $2 Million in Bitcoins and Ethers Lost in Security Breach - CoinDesk]</ref>.
|-
|May 12th, 2016
|Breach Ended
|The reported date that the breach ended<ref name=":0" />.
|-
|-
|May 13th, 2016
|May 13th, 2016
|Cited Date
|Cited Date
|The date of the hack cited by Kyle Gibson<ref name="kylegibson-86" />.
|The date of the hack cited by Kyle Gibson<ref name="kylegibson-86" />. Suspicious transactions on May 13th reportedly prompted the suspension of services<ref name=":0" />.
|-
|May 14th, 2016 5:22:56 AM MDT
|Official Statement Released On Reddit
|In a Reddit post, Gatecoin confirmed a breach of its system resulting in the loss of 15% of its crypto-asset deposits, valued at approximately $2 million<ref name=":0" />. The breach occurred between May 9 and May 12, 2016, with suspicious transactions detected on May 13 prompting the suspension of services. Despite storing most funds in multi-signature cold wallets, hackers bypassed this security measure, diverting ETH and BTC deposits to hot wallets during the breach. Gatecoin plans to release a platform for clients to withdraw remaining funds by May 28, 2016, with the exact date for ETH withdrawals pending confirmation. The exchange assures the security of DGD, REP, and DAO funds, while working to raise additional funds to reimburse affected customers. Gatecoin expresses gratitude for community support and pledges to provide updates via Twitter, Reddit, and its homepage<ref name=":0" />.
|-
|May 16th, 2016 10:27:00 AM MDT
|CoinDesk Article On Breach
|CoinDesk reports that Gatecoin has disclosed the cyberattack on its hot wallets, with the loss of funds estimated at $2 million<ref name=":1" />. The breach, believed to have begun on May 9th and continued for three days, led to the theft of 185,000 ethers and 250 bitcoins. Gatecoin acknowledged that its security measures, including multi-signature cold wallets, were compromised, allowing funds to bypass cold storage and go directly to hot wallets during the breach. The incident coincided with TheDAO's crowdsale, raising concerns about the security of Ethereum-based tokens<ref name=":1" />. Gatecoin plans to establish a portal for withdrawing DAO-related tokens in two weeks but did not specify a timeline for processing bitcoin and ether withdrawals<ref name=":1" />.
|-
|May 28th, 2016
|Withdrawal Platform Promised
|The original Reddit announcement promised a withdrawal site would be made available on May 28th<ref name=":0" />. The promised withdrawals were for remaining funds in BTC, DAO, DGD, REP, USD, EUR and HKD<ref name=":0" />.
|-
|-
|March 14th, 2019 8:50:00 AM MDT
|March 14th, 2019 8:50:00 AM MDT
Line 54: Line 57:
|CoinDesk Article On Bankruptcy
|CoinDesk Article On Bankruptcy
|CoinDesk reports that Hong Kong-based cryptocurrency exchange Gatecoin is set to cease operations and enter liquidation following a prolonged struggle to recover funds lost amid a dispute with a former payment services provider<ref name="coindesk-18" />. The announcement, made via the company's website, cited ongoing banking issues since September 2018 as a primary reason for the shutdown<ref name="coindesk-18" />. Despite efforts to resume operations with alternative processors and banks, Gatecoin faced insurmountable challenges, leading to a court order to wind up immediately<ref name="coindesk-18" />. The exchange assured customers of its intent to distribute remaining assets to creditors but left uncertainties regarding reimbursement for those affected by the 2016 cyberattack that resulted in the loss of significant cryptocurrency holdings<ref name="coindesk-18" />.
|CoinDesk reports that Hong Kong-based cryptocurrency exchange Gatecoin is set to cease operations and enter liquidation following a prolonged struggle to recover funds lost amid a dispute with a former payment services provider<ref name="coindesk-18" />. The announcement, made via the company's website, cited ongoing banking issues since September 2018 as a primary reason for the shutdown<ref name="coindesk-18" />. Despite efforts to resume operations with alternative processors and banks, Gatecoin faced insurmountable challenges, leading to a court order to wind up immediately<ref name="coindesk-18" />. The exchange assured customers of its intent to distribute remaining assets to creditors but left uncertainties regarding reimbursement for those affected by the 2016 cyberattack that resulted in the loss of significant cryptocurrency holdings<ref name="coindesk-18" />.
|-
|
|
|
|-
|-
|April 1st, 2019 2:45:11 AM MDT
|April 1st, 2019 2:45:11 AM MDT
Line 59: Line 66:
|TheNextWeb reports on Gatecoin has finally met its demise as liquidators take control of the company after facing a series of hacking incidents and banking troubles<ref name="thenextweb-16" />. Established in 2013 in Hong Kong, Gatecoin primarily focused on Bitcoin and Ethereum markets. However, in 2016, it suffered a significant loss of 185,000 ETH and 250 BTC due to a hack on its hot wallets, followed by banking disruptions in 2017 when its Hong Kong-based accounts were frozen<ref name="thenextweb-16" />. With the appointment of official liquidators, Gatecoin's journey comes to a definitive end, marking the closure of one of the pioneering exchanges in the cryptocurrency landscape<ref name="thenextweb-16" />.
|TheNextWeb reports on Gatecoin has finally met its demise as liquidators take control of the company after facing a series of hacking incidents and banking troubles<ref name="thenextweb-16" />. Established in 2013 in Hong Kong, Gatecoin primarily focused on Bitcoin and Ethereum markets. However, in 2016, it suffered a significant loss of 185,000 ETH and 250 BTC due to a hack on its hot wallets, followed by banking disruptions in 2017 when its Hong Kong-based accounts were frozen<ref name="thenextweb-16" />. With the appointment of official liquidators, Gatecoin's journey comes to a definitive end, marking the closure of one of the pioneering exchanges in the cryptocurrency landscape<ref name="thenextweb-16" />.
|}
|}
== Technical Details ==
=== Breach Of Multi-Signature Systems ===
<ref name=":1" /><blockquote>"We have previously communicated the fact that most clients’ crypto-asset funds are stored in multi-signature cold wallets. However, the malicious external party involved in this breach, managed to alter our system so that ETH deposit transfers by-passed the multi-sig cold storage and went directly to the hot wallet during the breach period. This means that losses of ETH funds exceed the 5% limit that we imposed on our hot wallets."</blockquote>
=== Wallets Used By Thief ===
The forensic examination identified several wallets which were involved in the theft<ref name=":0" />:
<nowiki>*</nowiki>0x04786aada9deea2150deab7b3b8911c309f5ed90 *0xc062dceed93087c9112ff7b02d53e928e49cec09 *0x1342a001544b8b7ae4a5d374e33114c66d78bd5f *0xd4914762f9bd566bd0882b71af5439c0476d2ff6 *4a1b96b166de37860195af37b6396a0516b009536e0f332006ca61b4fab0cd08 *2f41b858712149df089c21d4e1c036e0a465335c5a29be38df8e945a51e4d809 *271c51ff2e6c84c565c94d79872a79d77726fccd47192b6c8f6745f7482e281a *435e0cc79372eef5f43d8d81320940165ea1a0828adab3fdb9822a17caffaf2b *d494c7ca3a03f30c121b02f558b068d3597092454ad325bc320383f070d536bc *90622fc9968b79c90a9ac26f11d13d8dd97ba5b7e9c103594873e6306f7357ea<blockquote></blockquote>


== Total Amount Lost ==
== Total Amount Lost ==
Kyle Gibson reports the amount at 250 bitcoin, with an estimated value of $2,500,000 USD<ref name="kylegibson-86" />. The theft of any Ethereum amount is not mentioned<ref name="kylegibson-86" />.
On May 14th, Gatecoin announced that the losses were 15% of their client funds with a total of 185,000 ETH and 250 BTC reported<ref name=":0" />. News sources such as CoinDesk and TheNextWeb reported the full loss amount<ref name=":1" /><ref name="thenextweb-16" />.
 


According to TheNextWeb it suffered a significant loss of 185,000 ETH and 250 BTC due to a hack on its hot wallets<ref name="thenextweb-16" />.
Kyle Gibson reported only the amount at 250 bitcoin, with an estimated value of $2,500,000 USD<ref name="kylegibson-86" />. The theft of any Ethereum amount was not mentioned in his report<ref name="kylegibson-86" />.


According to CoinTelegraph, the amount lost "during the hack" was "around $2 million in cryptocurrencies"<ref name="cointelegraph-17" />.
Gatecoin stated that the lost cryptocurrency was "equivalent to USD 2 million" in their Reddit post<ref name=":0" />. According to CoinTelegraph, the amount lost "during the hack" was "around $2 million in cryptocurrencies"<ref name="cointelegraph-17" />. CoinDesk estimated that amount as $2.14m at "press time"<ref name=":1" />.


The total amount lost has been estimated at $2,500,000 USD.
The total amount lost has been estimated at $2,500,000 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 ==
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?
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?
Gatecoin involved the services of third party Tehtri Security in conducting a forensic examination<ref name=":0" />.




"News emerged last week of yet another security event in the digital currency exchange ecosystem, this time impacting a Hong Kong-based service involved in the sale of assets related to Ethereum-based decentralized autonomous organizations (DAOs). As reported on Friday, Gatecoin experienced a cyberattack on its hot wallets that resulted in the loss of funds. A new update from the exchange team indicated that as much as $2m was lost, confirming rumors that circulated soon after the hack became apparent."<ref name="kylegibson-86" />
"News emerged last week of yet another security event in the digital currency exchange ecosystem, this time impacting a Hong Kong-based service involved in the sale of assets related to Ethereum-based decentralized autonomous organizations (DAOs). As reported on Friday, Gatecoin experienced a cyberattack on its hot wallets that resulted in the loss of funds. A new update from the exchange team indicated that as much as $2m was lost, confirming rumors that circulated soon after the hack became apparent."<ref name="kylegibson-86" />
=== Statement On Reddit ===
On May 14th, a day after noticing the suspicious transactions and shutting down their services, Gatecoin issued a public statement through Reddit<ref name=":0" />.<blockquote>
The Gatecoin team greatly appreciates the patience of all users and stakeholders while we work with Tehtri Security to confirm all of the details related to the breach and ensure that our systems can be moved to a new, clean, thoroughly tested, and monitored infrastructure before services can resume.
We sincerely apologize for all the concern experienced by our clients and for the inconvenience caused while clients wait for their fund withdrawals to be processed. Gatecoin would also like to express our gratitude to the community of exchanges that have very kindly volunteered to help identify the parties responsible for the stolen funds.</blockquote>


== Ultimate Outcome ==
== Ultimate Outcome ==
Line 90: Line 114:


=== Inclusion On Hack Lists ===
=== Inclusion On Hack Lists ===
<ref name="kylegibson-86" /><ref name="bitcoinexchangeguide-218" /><ref name="slowmisthacked-1160" />
The attack was included on a list put together by Kyle Gibson<ref name="kylegibson-86" />.<ref name="bitcoinexchangeguide-218" /><ref name="slowmisthacked-1160" />


== Total Amount Recovered ==
== Total Amount Recovered ==

Revision as of 15:07, 2 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.

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Gatecoin was one of the first regulated digital asset exchanges. This didn’t stop the hack of 185,000 ETH and 250 BTC. According to a forensic analysis, the exchange may have been the victim of a man-in-the-middle attack. The malicious external party involved in this breach managed to alter their system so that BTC and ETH deposit transfers bypassed the multisig cold storage and went directly to the hacker’s hot wallet during the breach period. The company fired their CTO, managed to raise $500k in order to reopen, and ultimately repaid all customers. They were saved by maintaining large cold wallet reserves which appear to have been properly stored, and appear to have dealt with the issue transparently. Having hot wallet insurance would have further assisted with the recovery; however a system like Proof of Reserves or an automated alert system could have allowed the issue to be noted sooner.

This exchange or platform is based in Hong Kong, or the incident targeted people primarily in Hong Kong.[1][2][3][4][5][6][7][8][9][10]

About Gatecoin

Established in 2013 in Hong Kong, Gatecoin primarily focused on Bitcoin and Ethereum markets[11].

Aurélien Menant was the current CEO at the time of the incident[1].

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 - Gatecoin Hack
Date Event Description
May 9th, 2016 Breach Begin The reported date that that breach began[1][12].
May 12th, 2016 Breach Ended The reported date that the breach ended[1].
May 13th, 2016 Cited Date The date of the hack cited by Kyle Gibson[13]. Suspicious transactions on May 13th reportedly prompted the suspension of services[1].
May 14th, 2016 5:22:56 AM MDT Official Statement Released On Reddit In a Reddit post, Gatecoin confirmed a breach of its system resulting in the loss of 15% of its crypto-asset deposits, valued at approximately $2 million[1]. The breach occurred between May 9 and May 12, 2016, with suspicious transactions detected on May 13 prompting the suspension of services. Despite storing most funds in multi-signature cold wallets, hackers bypassed this security measure, diverting ETH and BTC deposits to hot wallets during the breach. Gatecoin plans to release a platform for clients to withdraw remaining funds by May 28, 2016, with the exact date for ETH withdrawals pending confirmation. The exchange assures the security of DGD, REP, and DAO funds, while working to raise additional funds to reimburse affected customers. Gatecoin expresses gratitude for community support and pledges to provide updates via Twitter, Reddit, and its homepage[1].
May 16th, 2016 10:27:00 AM MDT CoinDesk Article On Breach CoinDesk reports that Gatecoin has disclosed the cyberattack on its hot wallets, with the loss of funds estimated at $2 million[12]. The breach, believed to have begun on May 9th and continued for three days, led to the theft of 185,000 ethers and 250 bitcoins. Gatecoin acknowledged that its security measures, including multi-signature cold wallets, were compromised, allowing funds to bypass cold storage and go directly to hot wallets during the breach. The incident coincided with TheDAO's crowdsale, raising concerns about the security of Ethereum-based tokens[12]. Gatecoin plans to establish a portal for withdrawing DAO-related tokens in two weeks but did not specify a timeline for processing bitcoin and ether withdrawals[12].
May 28th, 2016 Withdrawal Platform Promised The original Reddit announcement promised a withdrawal site would be made available on May 28th[1]. The promised withdrawals were for remaining funds in BTC, DAO, DGD, REP, USD, EUR and HKD[1].
March 14th, 2019 8:50:00 AM MDT CoinTelegraph Article On Bankruptcy CoinTelegraph reports that following ongoing banking problems and a tumultuous history marked by a major hack in May 2016, Hong Kong-based cryptocurrency exchange Gatecoin has been ordered to undergo compulsory liquidation[14]. The exchange, which lost around $2 million in cryptocurrencies during the hack, announced its winding-up order on March 13, leading to an immediate cessation of operations. Gatecoin attributed its financial difficulties to issues with a Payment Service Provider (PSP), which it claimed failed to process transfers promptly, causing substantial losses and ultimately rendering the exchange unable to sustain its operations[14]. Despite efforts to recover funds and mitigate losses, Gatecoin's struggles persisted, leading to its final liquidation[14].
March 14th, 2019 7:00:17 PM MDT CoinDesk Article On Bankruptcy CoinDesk reports that Hong Kong-based cryptocurrency exchange Gatecoin is set to cease operations and enter liquidation following a prolonged struggle to recover funds lost amid a dispute with a former payment services provider[15]. The announcement, made via the company's website, cited ongoing banking issues since September 2018 as a primary reason for the shutdown[15]. Despite efforts to resume operations with alternative processors and banks, Gatecoin faced insurmountable challenges, leading to a court order to wind up immediately[15]. The exchange assured customers of its intent to distribute remaining assets to creditors but left uncertainties regarding reimbursement for those affected by the 2016 cyberattack that resulted in the loss of significant cryptocurrency holdings[15].
April 1st, 2019 2:45:11 AM MDT TheNextWeb Article TheNextWeb reports on Gatecoin has finally met its demise as liquidators take control of the company after facing a series of hacking incidents and banking troubles[11]. Established in 2013 in Hong Kong, Gatecoin primarily focused on Bitcoin and Ethereum markets. However, in 2016, it suffered a significant loss of 185,000 ETH and 250 BTC due to a hack on its hot wallets, followed by banking disruptions in 2017 when its Hong Kong-based accounts were frozen[11]. With the appointment of official liquidators, Gatecoin's journey comes to a definitive end, marking the closure of one of the pioneering exchanges in the cryptocurrency landscape[11].

Technical Details

Breach Of Multi-Signature Systems

[12]

"We have previously communicated the fact that most clients’ crypto-asset funds are stored in multi-signature cold wallets. However, the malicious external party involved in this breach, managed to alter our system so that ETH deposit transfers by-passed the multi-sig cold storage and went directly to the hot wallet during the breach period. This means that losses of ETH funds exceed the 5% limit that we imposed on our hot wallets."

Wallets Used By Thief

The forensic examination identified several wallets which were involved in the theft[1]:

*0x04786aada9deea2150deab7b3b8911c309f5ed90 *0xc062dceed93087c9112ff7b02d53e928e49cec09 *0x1342a001544b8b7ae4a5d374e33114c66d78bd5f *0xd4914762f9bd566bd0882b71af5439c0476d2ff6 *4a1b96b166de37860195af37b6396a0516b009536e0f332006ca61b4fab0cd08 *2f41b858712149df089c21d4e1c036e0a465335c5a29be38df8e945a51e4d809 *271c51ff2e6c84c565c94d79872a79d77726fccd47192b6c8f6745f7482e281a *435e0cc79372eef5f43d8d81320940165ea1a0828adab3fdb9822a17caffaf2b *d494c7ca3a03f30c121b02f558b068d3597092454ad325bc320383f070d536bc *90622fc9968b79c90a9ac26f11d13d8dd97ba5b7e9c103594873e6306f7357ea

Total Amount Lost

On May 14th, Gatecoin announced that the losses were 15% of their client funds with a total of 185,000 ETH and 250 BTC reported[1]. News sources such as CoinDesk and TheNextWeb reported the full loss amount[12][11].

Kyle Gibson reported only the amount at 250 bitcoin, with an estimated value of $2,500,000 USD[13]. The theft of any Ethereum amount was not mentioned in his report[13].

Gatecoin stated that the lost cryptocurrency was "equivalent to USD 2 million" in their Reddit post[1]. According to CoinTelegraph, the amount lost "during the hack" was "around $2 million in cryptocurrencies"[14]. CoinDesk estimated that amount as $2.14m at "press time"[12].

The total amount lost has been estimated at $2,500,000 USD.

Immediate Reactions

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?

Gatecoin involved the services of third party Tehtri Security in conducting a forensic examination[1].


"News emerged last week of yet another security event in the digital currency exchange ecosystem, this time impacting a Hong Kong-based service involved in the sale of assets related to Ethereum-based decentralized autonomous organizations (DAOs). As reported on Friday, Gatecoin experienced a cyberattack on its hot wallets that resulted in the loss of funds. A new update from the exchange team indicated that as much as $2m was lost, confirming rumors that circulated soon after the hack became apparent."[13]

Statement On Reddit

On May 14th, a day after noticing the suspicious transactions and shutting down their services, Gatecoin issued a public statement through Reddit[1].

The Gatecoin team greatly appreciates the patience of all users and stakeholders while we work with Tehtri Security to confirm all of the details related to the breach and ensure that our systems can be moved to a new, clean, thoroughly tested, and monitored infrastructure before services can resume.

We sincerely apologize for all the concern experienced by our clients and for the inconvenience caused while clients wait for their fund withdrawals to be processed. Gatecoin would also like to express our gratitude to the community of exchanges that have very kindly volunteered to help identify the parties responsible for the stolen funds.

Ultimate Outcome

Gatecoin experienced significant banking disruptions in 2017, and ultimately entered bankruptcy in 2019. The exchange is remembered in various historical records.

Banking Disruptions in 2017

Gatecoin experienced banking disruptions in 2017 when its Hong Kong-based accounts were frozen[11].

Exchange Enters Bankruptcy

Hong Kong-based cryptocurrency exchange Gatecoin was reportedly ordered to undergo compulsory liquidation on March 13th, 2019, although the court issuing the order was not specified[15][14]. The exchange, which , announced its winding-up order on March 13, leading to an immediate cessation of operations. Gatecoin attributed its financial difficulties to issues with a Payment Service Provider (PSP), which it claimed failed to process transfers promptly, causing substantial losses and ultimately rendering the exchange unable to sustain its operations[14]. TheNextWeb reported on April 1st that Gatecoin had finally met its demise as liquidators take control of the company after facing a series of hacking incidents and banking troubles[11]. Despite efforts to recover funds and mitigate losses, Gatecoin's struggles persisted, leading to its final liquidation[14]. With the appointment of official liquidators, Gatecoin's journey comes to a definitive end, marking the closure of one of the pioneering exchanges in the cryptocurrency landscape[11].

CoinDesk reports that Hong Kong-based cryptocurrency exchange Gatecoin is set to cease operations and enter liquidation following a prolonged struggle to recover funds lost amid a dispute with a former payment services provider. The announcement, made via the company's website, cited ongoing banking issues since September 2018 as a primary reason for the shutdown[15]. Despite efforts to resume operations with alternative processors and banks, Gatecoin faced insurmountable challenges, leading to a court order to wind up immediately[15]. The exchange assured customers of its intent to distribute remaining assets to creditors but left uncertainties regarding reimbursement for those affected by the 2016 cyberattack that resulted in the loss of significant cryptocurrency holdings[15].

Inclusion On Hack Lists

The attack was included on a list put together by Kyle Gibson[13].[16][17]

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

Coming soon.

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. ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 1.13 OFFICIAL STATEMENT REGARDING GATECOIN HOT WALLET BREACH - Reddit (Accessed Apr 2, 2024)
  2. ↑ https://cointelegraph.com/news/banks-shun-bitcoin-in-hong-kong-businesses-seek-foreign-help
  3. ↑ https://www.scmp.com/news/hong-kong/economy/article/2120506/hong-kongs-bitcoin-businesses-suffer-after-local-bank
  4. ↑ https://cointelegraph.com/news/gatecoin-launches-bitcoin-exchange-with-segregated-bank-accounts
  5. ↑ https://gatecoin.com/
  6. ↑ https://www.bloomberg.com/news/articles/2019-03-03/why-crypto-companies-still-can-t-open-checking-accounts
  7. ↑ https://www.reddit.com/r/gatecoin/comments/b0pe1i/gatecoin_liquidated/
  8. ↑ https://www.coindesk.com/markets/2016/05/13/digital-currency-exchange-gatecoin-offline-after-loss-of-funds/
  9. ↑ https://twitter.com/Gatecoin/status/732136409650208768
  10. ↑ https://np.reddit.com/r/ethereum/comments/4oxog1/gatecoins_hacked_ether_addresses_are_known_do_we/
  11. ↑ 11.0 11.1 11.2 11.3 11.4 11.5 11.6 11.7 Liquidators put the final nail in Gatecoin’s coffin - TheNextWeb (Feb 3, 2020)
  12. ↑ 12.0 12.1 12.2 12.3 12.4 12.5 12.6 Gatecoin Claims $2 Million in Bitcoins and Ethers Lost in Security Breach - CoinDesk
  13. ↑ 13.0 13.1 13.2 13.3 13.4 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents - Kyle Gibson (Jan 25, 2020)
  14. ↑ 14.0 14.1 14.2 14.3 14.4 14.5 14.6 Previously Hacked Gatecoin Exchange Receives Liquidation Order Following Banking Problems - CoinTelegraph (Feb 3, 2020)
  15. ↑ 15.0 15.1 15.2 15.3 15.4 15.5 15.6 15.7 Gatecoin Crypto Exchange to Shut Down on Court’s Orders - CoinDesk (Feb 3, 2020)
  16. ↑ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Mar 5, 2020)
  17. ↑ SlowMist Hacked - SlowMist Zone (Jun 26, 2021)
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