A bitcoin exchange that was hacked for $65 million says that all of its customers will lose 36% of their funds to account for the losses.
Bitfinex, one of the largest bitcoin exchanges in the world, had almost 120,000 bitcoins stolen by hackers on August 2.
On Saturday, the Hong Kong-based business announced these losses will be “generalized” — meaning all the losses will be shared between all users, even if none of their bitcoins were taken.
In return, customers are being given digital “tokens” that record their losses, which may one day be redeemed or exchanged for shares of iFinex, the company that operates Bitfinex.
It’s not yet clear what the nature of the breach of the exchange was, or who was responsible for the attack. In the immediate aftermath, the price of bitcoin dropped 20% compared to its 24-hour high — as low as $480, down from $607.
It’s a huge hack — the second-largest ever successful confirmed attack on a bitcoin exchange. Back in 2014, MtGox, then the largest exchange, collapsed after $460 million in bitcoin was stolen by apparent hackers.
Ethereum — an alternative digital currency — has recently been rocked by an attack on the DAO, a decentralised organisation that ran on its blockchain. The attacker managed to obtain $50 million-worth of Ether, but the community effectively split the currency in a “hard fork” to prevent them from being able to use it.
Bitfienx is one of the biggest exchanges out there: It dominates bitcoin-USD trading, making up 50% of total volume. It also disrupts what has been a bullish year for the currency thus far. As recently as January 2016, bitcoin was trading at just over $200 — less than a third of its $740-odd June 2016 highs.
“Following the theft on August 2nd, the Bitfinex team has been working tirelessly towards bringing the platform back online in a secure and controlled manner. We have finalised the accounting of losses incurred and are currently coordinating strategic plans for compensating customers.
We intend to come online within 24-48 hours with limited platform functionality. Additional announcements will be made as we progressively enable more platform features and return to full operations. We appreciate that our customers and the public want this handled quickly, but it needs to be done a way in which all assets are secure and immune from vulnerabilities. Every resource is being leveraged to make that happen in a safe and optimal way.
As disclosed in earlier announcements, all withdrawals, open orders, and open funding offers have been canceled and all financed positions have been settled. Exact settlement prices were published on August 3rd.
After much thought, analysis, and consultation, we have arrived at the conclusion that losses must be generalized across all accounts and assets. This is the closest approximation to what would happen in a liquidation context. Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067%. In a later announcement we will explain in full detail the methodology used to compute these losses.
We are actively discussing various strategic options with numerous potential investors as part of our strategy to fully compensate our customers. Such discussions, however, are in early stages and will likely take time to play out. In the meantime, In place of the loss in each wallet, we are crediting a token labelled BFX to record each customer’s discrete losses. Tokens will be distributed without release or waiver. The BFX tokens will remain outstanding until redeemed in full by Bitfinex or possibly exchanged — upon the creditor’s request and Bitfinex’s acceptance — for shares of iFinex Inc. We are still sorting out many details on this; we will post further updates in the coming days.
Thank you for your continued patience and for the many generous offers of support that we have received over the last several days. Notwithstanding this attack, we continue to believe in the possibilities associated with bitcoin. We will continue to update our customers and the public as and when we can.”