Flexcoin is shutting down.

On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. The attacker made off with 896 BTC, dividing them into these two addresses:

1NDkevapt4SWYFEmquCDBSf7DLMTNVggdu

1QFcC5JitGwpFKqRDd9QNH3eGN56dCNgy6

As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.
Users who put their coins into cold storage will be contacted by Flexcoin and asked to verify their identity. Once identified, cold storage coins will be transferred out free of charge. Cold storage coins were held offline and not within reach of the attacker. All other users will be directed to Flexcoin's "Terms of service" located at "Flexcoin.com/118.html" a document which was agreed on, upon signing up with Flexcoin.

Flexcoin will attempt to work with law enforcement to trace the source of the hack.

Updates will be posted on twitter as soon as they become available.

By Takashi Mochizuki and Eleanor Warnock

TOKYO--Just six months ago, Mark Karpelès was sitting on top of the world. Mt. Gox, his Tokyo-based platform that had started as an exchange for Magic trading cards, had in a short time become the world's dominant platform for exchanging the new big thing--bitcoins.

Cut to a snowy February morning in Tokyo, and you find Mr. Karpelès trying to walk past a bitcoin trader holding a sign outside Mt. Gox's offices in the hip Shibuya neighborhood, asking: "MT. GOX--WHERE IS OUR MONEY?"

The trader, Kolin Burges, who had flown in from London, was only one of many customers of the company who have been pressing the trading platform to disclose more about its financial health after it froze customer withdrawals on Feb. 7.

The travails of Mt. Gox illustrate the convulsions of the bitcoin market as the first generation of companies trading the virtual currency face growing technical and security challenges.

Chris Larsen, chief executive of San Francisco-based Ripple Labs Inc., a startup associated with another virtual currency, ripples, likened the convulsions as the bitcoin market expands to the early days of the Internet, when it wasn't clear that the World Wide Web would really catch on.

Then, "it all just seemed like the craziest stuff--who would ever use this?--and now it's absolutely in the fabric of every enterprise on earth," he said.

Mr. Larsen developed Ripple with another bitcoin entrepreneur, Jed McCaleb, the founder of Mt. Gox, who sold it to Mr. Karpelès in 2011. The name Mt. Gox, which came from the Magic card game the company originally dealt in before Mr. McCaleb turned it onto bitcoins, is short for Magic: The Gathering Online Exchange.

Mt. Gox has been wrestling with problems since earlier this year, when it halted withdrawals in dollars.

Also in May, some of Mt. Gox's funds were seized by U.S. regulators, who said the exchange wasn't properly registered in the U.S. Mt. Gox said in a statement last month that it is has been properly registered as a money-services business in the U.S. since the end of June.

After Mt. Gox again abruptly halted customer withdrawals on Feb. 7, it blamed its issues on a glitch in the bitcoin software.

On Feb. 10, Mt. Gox said it had been hit by fraudulent requests for payment by users exploiting a feature in the core protocol known as "transaction malleability."

Initially, many in the bitcoin community argued that Mt. Gox had simply failed to use the correct internal procedures to protect its accounts. The next day, however, a hacking attack crippled other bitcoin-exchange platforms and raised questions about the security of the global network for trading the virtual currency.

Asked why the company hadn't addressed customers' concern sooner, Mr. Karpelès responded in an email interview with The Wall Street Journal on Monday: "I assume you refer to the malleability issue. We sincerely apologize for this incident; however, please understand that we are NOT the developers of Bitcoin." He added, "We are very surprised that anyone could fault MtGox instead of the bitcoin software."

However, he said, "We deeply apologize for any delays in our responses."

After Mr. Karpelès, who was running an IT company in Tokyo, bought Mt. Gox from Mr. McCaleb in 2011, Mt. Gox became the world's biggest bitcoin exchange by volume, with more than 80% of bitcoin trades, according to Bitcoinity.org, a service that tracks rates on various exchanges. During that time, the price of a single bitcoin rose from 92 cents to a peak of more than $1,147 last December, based on figures from CoinDesk, a bitcoin-data provider based in London.

Amid the turmoil surrounding Mt. Gox, CoinDesk removed Mt. Gox from its benchmark bitcoin index early last week. The index, which now includes just Slovenia-based Bitstamp and BTC-e of Bulgaria, stood at $624.63 in New York afternoon trading Monday, while Mt. Gox-traded bitcoin was valued at just $294.20. Its share of bitcoin trades had dropped to 25% on Monday, according to Bitcoinity.org.

But aside from the lower value of its bitcoins, investors are increasingly concerned about the status of their Mt. Gox accounts. The company's halt of bitcoin transfers to outside accounts led investors to speculate on online forums that the company had its bitcoins stolen by hackers or that it was out of cash and would default.

Tomoaki Ushida, who runs an IT consulting firm in Tokyo, has given up hope of recovering the two bitcoins he had in his Mt. Gox account. "I try to convince myself that I paid for a good lesson," he said. "If I ever get them returned, I'm lucky."

In the email interview, Mr. Karpelès responded to questions about the company's solvency or protection for customers' funds by saying that the matter is confidential. However, he said the company had discussed its business model with Japanese authorities "to ensure that we are operating within the law here."

At a weekly meeting Thursday of Mt. Gox investors and other members of Tokyo's small, tightknit bitcoin community at a bar about a 10-minute walk from Mt. Gox's headquarters, some 30 bitcoiners talked about bitcoins and exchanged the currency using cellphone-readable bar codes. Some members reminisced about tipping burlesque dancers in bitcoins at a bar called the Pink Cow in Tokyo's foreigner-rich Roppongi neighborhood that accepts bitcoins for payment.

But the conversation revolved mostly around Mt. Gox and whether the exchange would be able to honor deposits. Organizers had extended an invitation to Mr. Karpelès but said they didn't receive a response.

Ken Shishido, one of the group's organizers who works in the telecom industry, said, "Everyone's question is whether the company still has everyone's bitcoin and cash. That's a very critical thing we need to know."

Mr. Burges, the London investor, was among the bitcoiners Thursday night. The next morning, outside Mt. Gox's offices, he managed to get in a brief confrontation with Mr. Karpelès. "You still have everyone's bitcoin?" Mr. Burges asked while Mr. Karpelès tried to navigate around him holding a Starbucks cup and an umbrella.

In the wider Japanese business community, bitcoins aren't widely used or even well-known. Japanese officials are cautious about making any comments about bitcoins as they wait for the Bank of Japan to finish a study about the virtual currency. Still, some Japan-based lawyers say certain restrictions, especially on exchange platforms, should be considered in order to prevent criminal use of the currency, such as for money-laundering.

"I believe that regulating exchanges would be the best way to address these problems," said So Saito, a lawyer at the Tokyo law firm of Nishimura & Asahi.

Meanwhile, the turmoil at Mt. Gox has even touched the Pink Cow, home to the burlesque dancers, which has switched to another bitcoin payment process called BitPay.

Mt. Gox transactions are "taking an unacceptable length of time right now, so we are taking another route," said owner Traci Consoli. "Hopefully, a more stable system will evolve as it grows." [Suspicious link removed]j.com/article/BT-CO-20140217-704805.html

So, why didn't you make a small fortune for yourself arbitraging Gox and the other exchanges the past few months?