Police investigate Bitcoin bank that collapsed after $600K heist

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Mt. Gox and Satoshi Nakamoto have made Bitcoin headlines this week, but let’s not forget about Flexcoin.

When Mt. Gox declared bankruptcy last week to the tune of almost 850,000 lost bitcoins and over $400 million, reactions ranged from disbelief, to fury, to sarcastic quips. The breach worried Bitcoin investors, prompting other companies to assure its users that their cryptocurrency was safe.

“We hold zero coins in other companies, exchanges etc. While the MtGox closure is unfortunate, we at Flexcoin have not lost anything,” Flexcoin, a Bitcoin-based bank tweeted last week.

A week later, the Alberta, Canada company announced its closure due to a hack that resulted in 896 stolen bitcoins. And now, Canadian police have launched an investigation into the bank.

“As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately,” their website read.

The company further explained that the theft was “enabled through a flaw in the front end.” By using two accounts to transfer a substantial amount of bitcoins from one account to another, the hacker was able to walk away with almost $600,000.

The company originally tweeted a complaint that its requests for an investigation “were laughed at,” Reuters reported. Flexcoin later changed their tune, thanking the Edmonton, Alberta police publicly on its Twitter account and promising to provide more information later.

Flexcoin is not alone in the latest slew of online cryptocurrency exchange hacks. Earlier today, Ars Technica reported that cryptocurrency exchange website Poloniexa reported 76.69 bitcoins, or just less than $50,000, stolen. All told, it’s been a strange and troubled month for the still-young currency. On Thursday, Newsweek shocked the tech world by announcing it had uncovered the identity of Bitcoin’s founder. But the story fell apart only hours when the man, 64-year-old Los Angeles resident Dorian Nakamoto, denied he’d ever been involved in Bitcoin. The article’s one smoking gun— that he’d tacitly admitted to his involvement in Bitcoin when confronted in his driveway— was based on a simple misunderstanding.

One good piece of news for Flexcoin: It didn’t lose everything. Bitcoins stored offline in “cold storage” were not affected and will be returned to customers.

“Having this be the demise of our small company, after the endless hours of work we’ve put in, was never our intent,” the website read. “We’ve failed our customers, our business, and ultimately the Bitcoin community.”

Illustration by Jason Reed

Elizabeth Robinson

Elizabeth Robinson

Elizabeth Robinson is a tech reporter whose work for the Daily Dot focused on social media trends, smart home technology, and apps. In March 2017, she joined San Antonio Express-News as a digital producer.