Bitfinex Hot Wallet Hack
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Bitfinex was the largest exchange by volume at this time. It stored the vast majority of funds in proper sold storage, and a relatively small amount was in a hot wallet, which was breached.
The exchange absorbed the loss without impact to customers.
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]
About BitFinex
"Bitfinex is a Hong Kong-based cryptocurrency exchange owned and operated by iFinex Inc., which is headquartered in Hong Kong and registered in the British Virgin Islands." "The Bitfinex exchange is a popular platform for exchanging cryptocurrencies, also hosting spot and derivatives trading as well as certain lending, borrowing and staking features. Bitfinex came into existence in 2012." "BitFinex offers three main functions - it is a pure bitcoin to fiat exchange, a margin trading exchange and a liquidity provider. The platform offers a number of features available that expand the financial positions you can take - for example, the ability to short Bitcoin via margin trading."
"Bitfinex also has its own utility crypto token called Unus Sed Leo (LEO). Because it restricts a number of regions, Bitfinex U.S. customers are not allowed. On Bitfinex, KYC and Anti-Money Laundering procedures are employed." "It serves all except few countries in the world (mentioned below) and supports both fiat-to-crypto and crypto-to-crypto trades. Other notable features include margin trading, limit and stop orders, over-the-counter (OTC) trades, and others. While there are many options available, everything is laid out in an impressively intuitive fashion, with easy-to-navigate dashboards and menus."
Bitfinex, founded in 2012 and based in Hong Kong, operates as a leading cryptocurrency exchange offering various functions like bitcoin to fiat exchange, margin trading, and liquidity provision[1]. Despite being among the highest-volume exchanges globally, Bitfinex continues to operate and remains popular for its extensive trading options, customizable interface, low fees, and wide range of supported currencies and pairs[1]. Bitfinex provides a user-friendly trading platform. It requires KYC verification for certain services but offers basic access with just an email[1].
BitFinex functions as a bitcoin to fiat exchange, a margin trading platform, a liquidity provider, and an OTC desk[10][11]. It provides features like shorting Bitcoin through margin trading, expanding financial positions[10]. The exchange offers a wide range of trading pairs, high liquidity, and various trading options[11]. Additionally, the platform offers cryptocurrencies like Litecoin and Ethereum for trading, not just Bitcoin[10]. The platform charges competitive trading fees based on trading volume and offers flexibility in deposit and withdrawal methods, including bank transfers and cryptocurrency transfers[11]. Deposits and withdrawals are conducted through bank transfers, with fees of 0.1% and a minimum of $20, while Bitcoin and Litecoin transactions are free of charge[10].
The Reality
Bitfinex's trust and privacy are questioned due to its opaque operations and controversies surrounding its management and partnerships[1]. Bitfinex has faced criticism for its lack of transparency and connection to Tether (USDT), accused of manipulative activities[1].
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
Bitfinex experienced a theft of over 1,400 bitcoins from their hot wallet in May 2015.
| Date | Event | Description |
|---|---|---|
| May 22nd, 2015 | Main Event | Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here. |
| May 22nd, 2015 5:49:00 AM MDT | Twitter Post About Incident | BitFinex tweets on Twitter about the breach[12]. This links to their announcement on their website[13] and recommends that users do not deposit funds to previous deposit addresses[12]. |
Technical Details
"Reddit user gowithbtc tracked an estimated 1474 BTC (approximately $356 thousand USD) funneled away from Bitfinex in approximately eight hours."
Total Amount Lost
Amounts publicly reported have been as varied as 1,400 BTC[14], 1,459 BTC[5], 1,474 BTC, 1,500 BTC, and over 1,500 BTC.
The market price estimates for the value taken have been $356,000 USD or $400,000 USD.
"In May 2015, 1500 bitcoins were stolen during a hack."
"Bitfinex los[t] 1,500 bitcoin, worth $400,000 at the time, when its hot wallets, connected directly to the internet, are hacked."
"Following the hack, Reddit user gowithbtc tracked an estimated 1474 BTC (approximately $356 thousand USD) funneled away from Bitfinex in approximately eight hours."
The total amount lost has been estimated at $356,000 USD.
Immediate Reactions
BitFinex continued operating their trading platform throughout the incident[15]. BitFinex notified users of the breach on their website, requesting that users not deposit to the previously used deposit addresses[12][13].
Announcement On Website
BitFinex shared an announcement about the breach on their website[13] and spread word through Twitter[12].
Dear Customer although we keep over 99.5% of users' BTC deposits in secure multisig wallets, the small remaining amount in coins in our hot wallet are theoretically vulnerable to attack. We believe that our hot wallet keys might have been compromised and ask that all of our customer cease depositing cryptocurrency to old deposits addresses. We are in the process of creating a new hot wallet and will advise within the next few hours. Although this incident is unfortunate, its scale is small and will be fully absorbed by the company. Thanks a lot for your patience and comprehension. Bitfinex Team
"BitFinex’s hot wallet has been compromised. The hack may have resulted in the loss of only 0.5% of the total funds." "The amount represents 0.06 percent of the company’s total holdings."[14]
"BitFinex' Director of Community and Product Development, Zane Tackett, told Cointelegraph that "trading was not affected" and confirmed that the Bitcoin address posted in the article below does indeed belong to the culprit. He also said they have generated a new hot wallet "using a spare-machine designed especially for scenarios like this.""
"Don't deposit to old BTC addresses. New addresses are online and updates will follow soon."
Ultimate Outcome
Following this and other hacking incidents, Bitfinex has strengthened its security measures and compensated users for their losses[11]. Bitfinex has moved from a hot wallet cold wallet set up to segregating customer funds where each user has access to their own wallet which they can review on the blockchain[10]. Bitfinex now prioritizes user security with features like 2FA, IP monitoring, and cold storage for funds[11].
"Bitfinex indicates it will absorb the losses." "Although this incident is unfortunate, its scale is small and will be fully absorbed by the company. Thanks a lot for your patience and comprehension."
The incident was included in a list put together by Kyle Gibson[14] and BitcoinExchangeGuide[16].
The exchange has suffered security breaches and legal issues, including a lawsuit from the State of New York in 2019[1].
Total Amount Recovered
Bitfinex continued operating their trading platform throughout the incident[15] and repeatedly indicated that they would cover the loss for users[14]. Bitfinex ultimately strengthened their security measures and compensated users for their losses[11].
"Although this incident is unfortunate, its scale is small and will be fully absorbed by the company. Thanks a lot for your patience and comprehension."
There do not appear to have been any funds recovered in this case.
Ongoing Developments
What parts of this case are still remaining to be concluded?
General Prevention Policies
In this case, there were no customer losses.
Greater security can be obtained by storing more funds in offline multi-signature storage, and signing specific transactions for larger withdrawals.
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
- ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 Bitfinex Exchange: User Review Guide - Master The Crypto (Aug 7, 2021)
- ↑ Bitfinex - Wikipedia (Aug 6, 2021)
- ↑ Bitfinex Bitcoin exchange hot wallet hacked, estimated 1474 BTC stolen - SiliconANGLE (Sep 12, 2021)
- ↑ BitFinex's Hot Wallet Hacked, More Than 1,500 Bitcoins Stolen [UPDATE] - CoinTelegraph (Sep 12, 2021)
- ↑ 5.0 5.1 Bitfinex hack(22/5/2015): 1459 bitcoins lost - Reddit (Sep 12, 2021)
- ↑ Address: 17owg8RWb73qfE5HeQk6gg6RAgEUfxPXks - Blockchain Explorer (Sep 12, 2021)
- ↑ https://bitcoinmagazine.com/articles/bitfinex-hot-wallets-hacked-1400-bitcoin-may-stolen-1432326539/
- ↑ https://bitcoinmagazine.com/articles/warning-signs-timeline-tether-and-bitfinex-events/
- ↑ https://www.hackread.com/bitcoin-exchange-bitfinex-hot-wallet-hacked/
- ↑ 10.0 10.1 10.2 10.3 10.4 Bitfinex Exchange Reviews, Live Markets, Guides, Bitcoin charts - CryptoCompare (Aug 7, 2021)
- ↑ 11.0 11.1 11.2 11.3 11.4 11.5 Bitfinex Review (2021) - Is It Trustworthy? - CryptoNews (Accessed Aug 7, 2021)
- ↑ 12.0 12.1 12.2 12.3 BitFinex - "Urgent Action Required: Don't deposit to old BTC addresses. New addresses are online and updates will follow soon." - Twitter (Accessed Sep 12, 2021)
- ↑ 13.0 13.1 13.2 Urgent action required - BitFinex Announcements Archive March 6th, 2016 8:13:26 AM MST (Sep 12, 2021)
- ↑ 14.0 14.1 14.2 14.3 100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents - Kyle Gibson (Accessed Jan 25, 2020)
- ↑ 15.0 15.1 Stanislas Marion - "@bitfinex why haven't you halted trading until the matter is resolved ?" - Twitter (Accessed Apr 19, 2024)
- ↑ Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Accessed Mar 5, 2020)
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