Anytime there is a big theft of coins reported a drop in value follows. It’s important to know your risk by being familiar with history. After ever drop in value improvements where made and valuations rebounded pretty quickly.
The Tether Heist
Tether is a crypto whose value is pegged to the US dollar 1:1. On November 19, 2017 Tether said someone stole “$30,950,010 USDT. The funds where removed from the Tether Treasury wallet and transferred to an unauthorized Bitcoin account. Tether is not trying to get the coins back but instead they halted trading of their currency until they can update the Omni Core software that they use to run their software. several exchanges announced that they have halted Tether trades including Bitfinex. The rumor is that Bitfinex is the owner of Tether which makes this heist suspicious especially after Bitfinex announced that they are still solvent immediately following the Tether announcement. More importantly the shareholders report states that Bitfinex converts all dollars to Tether which is what is actually held in the account. The interesting part of this event is that the currency code was rewritten to prevent the thieves from getting away with the money. CNBC story
The Bitfinex Heist
$72 million worth of Bitcoin was stolen from the Bitfinex exchange platform in August 2016. “The bitcoin was stolen from users’ segregated wallets,” Zane Tackett, director for Bitfinex told Reuters. The news caused a drop in BitCoin prices and concern of a repeat of what happened to the previous largest exchange. Bitfinex is the largest exchange followed by Coinbase. Repeated thefts of this size could bring down the sovereignty of the entire crypto-currency market. The attacker took advantage of a vulnerability in the multi-signature system used for signing Bitcoin withdrawals. This system was used to increase speed and security with partner with BitGo. This was the second largest hack and no one has figured out what exactly happened.
Bitcoinica suffered two hacks in 2012. In the first hack someone was able to breach the customer service portal and empty 8 client accounts in the amount of 46,703 Bitcoins. Then a second attack the company’s production servers got hacked and 18,547 Bitcoin went missing. Lawsuits where filed after it was revealed that Bitcoinica stored large amounts of coins online and not in cold storage.
This incident is sad in that it was caused by a company doing due diligence and trying to improve wallet security. The good news is that white hat hackers realized and safely drained accounts to test the vulnerability. $160 Million of Ether coins was frozen. What happened was a user noticed a vulnerability in the code and preemptively erased it causing 500 wallets to be frozen. This vulnerability caused by Parity Multisig Wallet which requires multiple keys to issue transactions. An Ethereum hard fork may be in the future.