In Cyprus' Woes Deepen, Interest in Bitcoin Soars
Used primarily to buy goods and services online, bitcoin is a recent invention, created just four years ago by an Internet hacker (or group of hackers) known as Satoshi Nakamoto. As Bloomberg BusinessWeek notes, even by …
The largest Bitcoin exchange in Brazil gets hacked: depositors are not guaranteed to get their money back
Disclaimer: I'm not associated in any form with Mercado Bitcoin other than having done trades there. Luckily for me I didn't have any money there at the moment.
Mercado Bitcoin, the largest – and only – bitcoin exchange in Brazil, has been offline for almost a week now. For the first few days there was no communication, but the owner just sent an email to all accounts explaining he was hacked. I haven't seen it posted anywhere in English so I'l do my best to translate what I got.
As far as I understood, someone hacked his “redeem code” feature, being able to generate false credits in the system. Then during the night the hacker moved out all his credit into bitcoins, leaving MercadoBitcoin without enough BTC to pay back all the other depositors.
Mercado hasn't revealed how much was robbed or more details than that, but has said he will try to pay back what he can, in that order:
Withdraws in Reais that were requested before the attack
Deposits in Reais that hadn't been credited yet
Current balances in Reais
Current balances in Bitcoins
Meaning that depending on how much was left, bitcoin balances will only be given back if he is able to pay back all the money (in Reais) to other creditors, and even that money isn't fully guaranteed.
I posted about MercadoBitcoin last week when I wanted to share the word that Bitcoins in reais where 25% overvalued over other currencies. I assumed it was mostly because of the small amount of sellers but it seems there was also another factor: lack of trust in the exchange.
I doubt this attack is related to this reddit post: this week Exame one big financial magazine in Brazil also had a feature in Bitcoins which mentioned the Mercado. Either this was an opportunistic hack or just a case of worse timing, it seems that the adoption and reputation of Bitcoins in Brazil has received a bad punch.
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