I contacted Cryptsy a couple of times about the AMBER Wallet being in Maintenance and after a few weeks of silence I received an email with a link to this message on their blog. My guess is Cryptsy will not recover the stolen BTC which amounts to over $5.2 Million. Its a shame because this will be a huge blow to Bitcoin and all the other coins. It will give pause to all exchanges and what coins they deal with. Small coins will find it impossible to get listed on any of the major exchanges. But this kind of problem is almost impossible to avoid. The decentralization of these coins, the lack of oversight by an entity with legal authority, and the anonymity inherent in the design of these coins makes them easy targets for people who want to steal or even vandalize cryptocurrencies. The fact is we have no idea who the developers of any of these coins are or what their motives are. Many coins are legitimate, but as you can read, it only takes one bad one to cause a lot of damage.
Of course Crytpsy is to blame for much of this because the had a weakness in their own security. I hope someone finds the guilty party and receovers the coins. a 1000 BTC reward is a nice gift.
I also want to point out again how spreading rumors and innuendo picked up of message boards from crabby disgruntled miners can be very destructive in this world of altcoins. The markets are not that big and a run on an exchange is easy to get started. When this article about Cryptsy appeared I posted several time to people who were pushing the rumors to stop. Now the damage has been done. Cryptsy had a run on its currencies and is left unable to deal with the theft of the BTC. Had this been a real bank or exchange, authorities would be arresting the rumor mongers. So I caustion again, do not spread rumors or what someone else tells you or claims. If you have first hand knowledge, then fine, but taking a post from one person without verifying it and repeating it can create problems for everyone and all coins.
Read this and weep because I think this is another nail in the coffin of cryptocurrencies and it is truly a sad day.
Announcement
Cryptsy has had problems for some time now and it’s time to let everybody know exactly why. These problems were NOT because of any recent phishing attacks, or even a ddos attack, nor does it have anything to do with me personally.
About a year and a half ago, we were alerted in the early AM of a reduction in our safe/cold wallet balances of Bitcoin and Litecoin, as well as a couple other smaller cryptocurrencies. After a period of time of investigation it was found that the developer of Lucky7Coin had placed an IRC backdoor into the code of wallet, which allowed it to act as a sort of a Trojan, or command and control unit. This Trojan had likely been there for months before it was able to collect enough information to perform the attack. It does not appear that this was the original developer for LK7, as on 5/22/2014, we received this message from the new developer who wanted to maintain the codebase:
—
Hello,
Lucky7Coin is not maintained and I would like to take care of it. I have announced that on bitcointalk.org in Lucky7Coin thread. You’re the only exchange for this coin and I hope you will let me take care of it. I’m responsible. You don’t have to be afraid of errors or forks. I’m developing multipool and I know bitcoin internals and protocol.
https://bitcointalk.org/index.php?topic=295157.msg6861797#msg6861797For a start I’ve changed irc network, so clients could synchronize blockchain. Please upgrade as soon as you can.
Github repo:
https://github.com/alerj78/lucky7coinBranch “master” will always be for stable version, branch “devel” could be dirty. In a 2-3 weeks I’ll release new version with p2pool support and checkpoints. Before that I’ll contact you to check few blocks hashes for checkpoints and make sure there is no fork.
I hope we can cooperate and make this coin live again!
Jack
—
These are the approximate figures taken:
Bitcoin: 13,000 BTC
Litecoin: 300,000 LTC
This of course was a critical event for Cryptsy, however at the time the website was earning more than it was spending and we still have some reserves of those cryptocurrencies on hand. The decision was made to pull from our profits to fill these wallets back up over time, thus attempting to avert complete closure of the website at that time. This worked fine for awhile, as profits decreased due to low volume and low Bitcoin prices, we would adjust our spending accordingly. It wasn’t until an article from Coinfire came out that contained many false accusations that things began to crumble. The article basically caused a bank-run, and since we only had so much in reserves for those currencies problems began.
Our current customer liabilities for BTC is around 10,000 BTC, so as you can see we would like to see the Bitcoins returned for both our users and for ourselves.
Here are the transaction details from the Bitcoin wallet:
https://www.walletexplorer.com/wallet/0c07e0bec1002bd2As you can see, 2014-07-29 13:17:36 is when the event occurred. A very interesting fact here, however, is that those Bitcoins have not moved once since this happened. This gives rise to the possibility they can be recovered. In fact, I’m offering a bounty of 1000 BTC for information which leads to the recovery of the stolen coins.
If you happen to be the perpetrator of this crime, and want to send the coins back no questions asked, then you can simply send them to this address:
1KNi4E4MTsF7gfuPKPNAbrZWQvtdQBTAAa
If they are returned, then we will assume that no harm was meant and will not take any action to reveal who you are. If not, well, then I suppose the entire community will be looking for you.
Some may ask why we didn’t report this to the authorities when this occurred, and the answer is that we just didn’t know what happened, didn’t want to cause panic, and were unsure who exactly we should be contacting. At one time we had a open communication with Secret Service Agent Shaun Bridges on an unrelated matter, but I think we all know what happened with him – so he was no longer somebody we could report this to. Recently I attempted to contact the Miami FBI office to report this, but they instead directed me to report it on the I3C website. I’ve not heard anything from them.
I think the only real people who can assist with this are the people of the Bitcoin community itself.
Trades and withdrawals will be suspended on the site indefinately until some sort of resolution can be made.
Here are our options:
1. We shut down the website and file bankruptcy, letting users file claims via the bankruptcy process and letting the court make the disbursements.
- or –
2. Somebody else comes in to purchase and run Cryptsy while also making good on requested withdrawals.
- or –
3. If somehow we are able to re-aquire the stolen funds, then we allow all withdrawal requests to process.
I’m obviously open to any other ideas people may have on this.
If you have information, you can email
reward@cryptsy.com
