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What the Cryptsy hack means for the exchange

What the Cryptsy hack means for the exchange

Cryptsy, also popularly known as the new Mt Gox, an exchange that people have been seeing as scammy for a good period of time, has finally come out and admitted that they have been hacked, and lost most of the user’s funds.

In fact, the Cryptsy team now has a total liability of roughly 10,000 BTC, which equals to around $3.8 million. Suspicions started appearing once customers using the platform begun experiencing issues when trying to withdraw their funds. Numerous reports have been made, with Cryptsy refusing to respond to most of them. Things became serious a couple of days ago, when an anonymous source confirmed that Cryptsy’s offices have been emptied, with no hint of the team. Once this happened, numerous lawsuits were filed against the company, and members of the community started bashing it.

Recently the founder and main operator of the exchange has written a blog post, explaining the current situation, and admitting that the exchange had been hacked a couple of months ago. According to the founder: “It was found that the developer of Lucky7Coin had placed an IRC backdoor into the code of wallet, which allowed it to act as a sort of a Trojan, or command and control unit”.

When they discovered the virus, the Cryptsy team was well-aware of the fact that this was a critical event for the company. At first, they were able to handle the crisis thanks to their profit coming from various investments and the actual exchange commissions. However, soon enough, Cryptsy users started to report withdrawal issues, thus creating bad publicity for the platform, which greatly reduced their profits and ability to handle the crisis without having users suspect anything. While the platform mainly dealt with exchanging altcoins, there are thousands of users with their coins frozen, who are unable to withdraw.

At this moment in time, the Cryptsy team is looking for a new owner and investor who would like to take over the exchange. However, considering the bad publicity surrounding it, chances are that not many will volunteer as tributes. According to the blog post, the Cryptsy team also considered spreading the loss to all its users in the system, and allowing the trades to continue. However, this move will likely not be taken well by the users. Another idea that Cryptsy has considered would be to ‘Restrict withdrawals on short balanced coins, allowing withdrawals on a first come, first serve basis upon availability.” The bitcoin community considers that the best choice would be to file for bankruptcy and try to reimburse all users.

Based on everything that has been outlined so far, what do you personally think about the Cryptsy hack? Let us know your thoughts in the comment section below.

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