No, this isn't related to the Bitcoinica hack. The hack just makes the choices obvious and straightforward.

I, Zhou Tong (Zhou is my surname), will discontinue all involvement in Bitcoin-related projects after the Bitcoinica incident has been fully resolved until further notice.

I always believe in Bitcoin, or simply anything that brings people financial liberty. I have heavily invested in Bitcoin (I purchased one 1,000 BTC gold coin from Casascius and will keep it for as long as I can). And I have enjoyed what I have done for the Bitcoin community.

Really, thank you for all the wonderful support. It feels great to have an experimental project become the "best thing since sliced bread", and run one of the most profitable businesses in a new economy. Bitcoinica has a total historical revenue equivalent to about 0.67% of the whole Bitcoin economy. Not even Apple can match this record in the real world economies.

The first time I read about Bitcoin was in late 2010. My first reaction was "these coins are cheap, maybe it just doesn't work". I learned about Bitcoin again in mid 2011, when the first bubble started. I bought my first Bitcoin when it fell to $8. I told all my close friends and classmates about Bitcoin, simply because I think it's a cool idea. The idea of a margin trading platform quickly went into my mind, and I started working on Bitcoinica.

I lied about the time it took to build Bitcoinica. (I said I spent one week on it.) I started on September 4, 2011 and launched on September 9, 2011. Just four and half days. In a week, trading volume passed one million dollars. I started making profits like crazy.

In November, an investor approached me to acquire Bitcoinica. Due to regulatory concerns, I agreed to the deal and signed the agreement. Bitcoinica was sold for a good price. However, since the investor is unable to arrange for a replacement team, I continued to become the sole operator until Team Intersango took over two weeks ago. The investor let me keep all profits until late January, the official handover time. After handover, he continued to offer generous salary and performance bonus every month. The investor demands his identity to be protected so I won't share more information on this.

I left school in Singapore and decided to continue my education in Australia. I made the decision because of the Internet industry, and the hacker culture. I'm a web developer and I want to become a really good one. I want to work with smart hackers and wonderful designers to change the world. Singapore isn't particularly good at this. (Obviously, US West Coast should be a better choice, but for some other reasons I didn't consider US.)

I have started working on another project (not Bitcoin-related) that is going to make a little difference on the Internet. So far I have achieved great progress and I'm pretty confident about this new venture.

My life hasn't changed much except that I became more confident after Bitcoinica's success. I realized that I have the power to make something profitable. Such kind of confidence is extremely hard to get, until you really experience a significant success. I worked on several projects before, and all of them failed eventually. I thought I was confident because I kept building new stuff and improving myself. But the real confidence comes from the success itself.

I failed at one thing though, that is generating value for the society. Bitcoinica did create a place for people to trade more efficiently and provide liquidity to the market. However, speculation is a zero-sum game (or negative-sum, strictly saying). I know there can be many justifications for Bitcoinica's value, but all of them are against my intuition and values.

With the confidence and the innate intuition to build wonderful things for a better world, I decided to move on. I didn't quit Bitcoinica because it's the only source of income that I currently have.

I know that my time is valuable and industry establishment is really important. I don't want my name to be remembered by only Bitcoiners. It's true that I believe in Bitcoin's potential, but not everyone believes. If I'm a influential person I wouldn't have to do this, but the best way to be known in the Internet industry is to build products that save people time, money and headaches.

I'm going to be a young entrepreneur that solves problems for everyone. I leave Bitcoin only because it doesn't help address my real needs. Making money isn't that important after all.

I'll be a Bitcoin lover forever, and I will come back to this forum regularly to discuss about the future that's in our own hands! I will keep the 1,000 BTC  gold coin as a lifetime investment and I'm pretty confident that it'll be the best investment ever in my life.

Bitcoin FTW!

Your AML information is secure, and everything sent to verification@bitcoinica.com is secure too.

If your account is small, we're happy to proceed without additional evidence. However, for larger accounts with AML documents submitted (even those pending review ones), we may require the documents.

This is quite irrelevant. When the service initially launched, we didn't have a bitcoind server at all. That's why I was quite confident about security (and the trading volume is not that huge).

Both major incidents happen due to bitcoind problems (while we are trying to find alternate solutions), and there are tons of small incidents happening during development stage, majority are due to bitcoind problems as well.

I'm only a web developer and I know my limitations. This is how I justify the original Hacker News comments.

I'll never handle the wallet.dat again in my life, ever.

We are building an account claim page. You can submit your account information, financial information (balances) and trading information to verify your identity. We will then match with the records we have. If they have matched, we will send Bitcoin balance to your nominated Bitcoin address within 24 hours and USD balance with unrealized P/L to your email as a Mt. Gox code. If you sent the funds to us via Wire (i.e. you don't use Mt. Gox at all), we will try our best to fulfill wire transfer requests.

Current positions will all be liquidated at a settlement price. We haven't decided the price yet, but my personal estimate is 4.98 / 4.94. (All long positions can liquidate at 4.98 and all short positions can liquidate at 4.94, we pay the spread for you.) All unrealized P/L will be settled in USD. If you don't have sufficient USD balance, we will use your BTC to settle, with the mid-point exchange rate (again, we pay the spread).

The page will be up in a few days but I don't have accurate information on this. Patrick is working on the page now. Thanks for your understanding and patience.

Why should it matter? As I said, if the ownership is not clear, the assumed owner should be liable. And the ownership should be clear.

Everything. We will purchase BTC to return the funds if we don't have enough reserve.

We will reimburse everyone in full. Bitcoinica is a limited partnership, not a teenager's experimental project.

I didn't have enough time for this business, and I have other commitments. That's why someone else takes over.

This is not about "won't last" or whatever. A hack is definitely unanticipated. You're saying that I predicted something like this would happen before I gave up my sole ownership, and it was hence worthwhile to forgo the doubling-every-month revenue.

The compromised email server has nothing to do with me, I have no knowledge of its presence until the accident happens.

I was being held accountable for everything before the announcement, but no longer the case after the announcement. It's simple.

I would assume responsibility for everything happened to Bitcoinica due to private transactions that were not announced.

Who is the owner isn't important. The important thing is who is liable for the customer deposits. If I hadn't announced the take-over and such thing happens, I would be 100% liable because people were trusting Bitcoinica because of my reputation. However, everyone knows that Intersango has taken over Bitcoinica so the assumed liability doesn't exist any more.

I apologize for the lack of transparency. But it really has nothing to do with legitimacy.

The more serious thing is that we may need additional time to provide the details. We are working with Rackspace to know more about this issue.

EDIT: There's no additional financial loss. We have revoked the withdrawal API key.

I'm representing the company at the moment. I decided to stand out to post this thread because:

- I'm the first one to acknowledge this issue (as the other guys were asleep).
- I'm the usual person communicating about Bitcoinica on this forum.
- Most people assumed that zhoutong = Bitcoinica.

I'm in close communication with Intersango guys so you can voice out whatever you want.

There's no such thing as "incompetence" in a team. If you have to trace to the root cause, the compromised email server isn't mine, or has anything to do with my development work. Does that mean some people are more competent than the other? Obviously not. We are on the same boat.

There're a lot of details that I'm not supposed to disclose at this moment. But simply, I gave up my sole ownership a long time ago, even before the Linode hack. The Intersango guys are fully aware of everything and they have inspected the code and server configurations for weeks before signing their agreement. They fixed some non-trivial security issues in the past few weeks as well.

Quick Update

- It's more serious than we thought. We need some additional time to come up with a compensation proposal.
- Likely we will either shut down the platform or re-develop entirely (which will take months instead of days).
- The preliminary decision: reimburse for the full amount, including margin balances and position P/L.
- The root cause of this problem is an email server compromise. The email server belongs to one of our team members.
- Reminder again: Please do not reuse your Bitcoinica passwords as the database server was compromised. Do not click any links in the email. All Bitcoinica announcements will be updated on Bitcoinica website when available.

Important Disclaimer: I'm not a partner of Bitcoinica LP after the corporate reorganisation. Therefore, I have no financial obligation in this matter as I'm only an employee of Bitcoinica LP responsible for daily operations (no shares, no voting). However, I'll do my best with the team to resolve this problem as quickly as possible and minimize the impact for the community. I appreciate your patience and understanding.

We don't want to make Bitcoinica a fractional reserve. The sum of margin balance is the absolute minimum of funds we have to keep (so that we can honor every withdrawal request). Since the system is down at the moment, we don't have the knowledge of open positions. We're pretty sure that margin balance can be covered with our off-site reserves, but we are unable to determine value of unpaid unrealized profits and the unpaid swaps.

We will try our best to restore the system by Monday, and we will get back to you with a detailed investigation report and our resolution on impacted customers. Thank you for your patience!

Disclaimer: I'm representing Bitcoinica but I don't control the company any more ever since the corporate reorganization. I'm personally confident that other team members are going to give everyone a fair resolution.

Ok. The password reset email was sent to four addresses. I can already confirm that two of them are not compromised. We are waiting for the rest to wake up and check their email accounts. The email account compromise is the direct cause.

Same here. I think reimbursing is the right way to go, even if we are shutting down the business at a huge loss.

Please don't blame genjix. It's definitely not his fault.

He's not in our mailing list so it couldn't be him.

Well, shit just happens and it's not anyone's fault or incompetence here. I'm the only guy awake when the incident happens.

Noted. Thanks for the reminder.

I'm not the guy making such decisions, sorry.

If we decide to reimburse our customers this time, we will buy the exact amount from the market anyway. We don't want to owe any Bitcoins. USD is always the debt currency for us.