Business 3 October 2017

Cecille de Jesus

Suspicions rise as Chinese BTC exchange denies $3m hack

Some suggest an inside job as China shuts down exchanges, leaving victims with no clear legal course of action as police ignore complaints.

Towards the end of August, a user reportedly lost 200 bitcoins, then valued at around $750,000, through Chinese bitcoin company OKCoin’s exchange arm, OKEx. According to the report, a German IP logged into his account and traded all the bitcoins to ETC (ethereum classic), enabling the hacker to easily withdraw all the funds within an hour.

A few other reports of a similar attack emerged from users of both OKEx and OKCoin, with the overall loss amounting to a total of around 600 bitcoins (around $2.6 million).

OKCoin, once the world’s largest bitcoin exchange, asserted that the thefts had nothing to do with the platform, and suggested that all the hacked accounts may have simply fallen victim to phishing scams, viruses, or other security breaches, and “got their passwords stolen.” After all, while exchanges have historically been a hot target for thieves, so are individual accounts. Credit card and online banking theft, as well as identity fraud have in fact been around longer than cryptocurrency exchange hacks.

OKCoin’s dismissive stance, however, is failing to put out the fire. Rumors are starting to rise as more news outlets online pick up the story, with some even speculating whether it was an inside job perpetrated by the exchange itself, seeing as China’s recent crackdown on cryptocurrency exchanges means legal action would be unlikely, as all cryptocurrency exchanges in the country have been shut down. Victims were told to report the theft to the police themselves. The police, on the other hand, refuse to entertain the cases since the ban.

This isn’t the only problem OKCoin has been facing in the past few months. Earlier in August, an investigation by the People’s Bank of China questioned OKCoin and Huobi, China’s two biggest bitcoin exchanges, regarding their decision to use $150 million of idle client funds to invest in “wealth management products.” In response, OKCoin released a statement denying any wrongdoing: “We are, of course, prohibited from using our client’s fund for our own gain, and do not do so.”

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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