Flexcoin, a bitcoin bank, has been forced to shut down its services after hackers made off with 896 bitcoins worth $600,000.
The attack on Flexcoin took place on Sunday, March 2, and the company posted a statement pertaining to its shutdown on Tuesday, March 4.
"On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. The attacker made off with 896 BTC," posted the company on its website. "As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately."
Flexcoin disclosed that its systems were attacked and investigations reveal that "the extent of the theft was enabled by a flaw within the front-end." However, since the deposits of bitcoins were not regulated or insured like regular banks, only verified customers who paid a special fee to keep their bitcoins secure in "cold storage" would get bitcoins back from Flexcoin as the thief was unable to reach these.
"Users who put their coins into cold storage will be contacted by Flexcoin and asked to verify their identity," reads Flexcoin's statement. "Once identified, cold storage coins will be transferred out free of charge."
However, customers who kept bitcoins in Flexcoin's "hot wallet" are not so lucky as the company's terms of service notes that "Flexcoin Inc is not responsible for insuring any bitcoins stored in the Flexcoin system" and that any individual who used Flexxoin agreed to "not hold Flexcoin Inc, or Flexcoin Inc's stakeholders, or Flexcoin Inc's shareholders liable for any lost bitcoins."
The Flexcoin incident happens close on the heels of the Mt. Gox bankruptcy. Just two weeks earlier, Japan-based Mt. Gox, deemed to be the biggest exchange for the virtual currency at one time, shut down after filing for bankruptcy. Mt. Gox lost 75,000 bitcoins that belonged to clients after hackers exploited weaknesses in computer coding.
Flexcoin, which is based in Alberta, Canada, disclosed that it "will attempt to work with law enforcement to trace the source of the hack."
