Cryptocurrency Hacks: A Brief History of Major Scams

Although cryptocurrency and blockchain technology is considered the safest ways to make financial transactions, the segment itself is not immune to hackers. We have witnessed in the past some of the biggest heists in the cryptocurrency domain that has put a huge question mark on the credentials of safety measures adopted by the crypto players operating in the digital coin space. We list down here some of the most notorious cryptocurrency scams reported prominently among Cryptocurrency News and robbed investors millions of dollars of their investment.

 

1) Coincheck:

The enormity of the scam can be easily estimated from the fact that a total of $532 million were scammed in this infamous heist. In January 2018, Coincheck exchange, which is based in Japan, announced restrictions on the deposit and withdrawal of NEM cryptocurrency. The reason behind putting this restriction was the hack in which NEM worth of $532 million was stolen from the exchange. As NEM was stored in the hot wallet, scammers executed the heist by getting access to private keys. So that you know, the Coincheck scam is considered as the biggest scam in the history of the cryptocurrency world.

 

2) Mt.Gox:

The total money scammed in this particular scam is estimated to be around $437 million. The incident happened in 2014, and then, Mt.Gox was the largest cryptocurrency exchange in the world. It handled over 70% of Bitcoin transactions, but after the incident, the exchange stopped its operation by temporarily banning all Bitcoin withdrawals. The exchange stored Bitcoin in its hot wallet connected to the internet and loopholes in its security mechanism were exploited by scammers. As a result of that loss, Mt.Gox applied for bankruptcy in February 2014 while putting an end to its operations.

 

3) DAO:

The decentralized autonomous organization (DAO) faced the hack owing to a flaw in its code. As a result of this attack, 3.6 million ETH coins were lost whose value was estimated to be around $50 million. The scam is the biggest in the history of Ethereum. Although efforts were made to recover the money immediately after the heist, the presence of bug kept the ether community from applying a soft fork. In fact, the community split wide open on the matter of applying a hard fork to recover the money and as a result, we have two communities today with the name of Ethereum Classic and Ethereum.

 

4) Bitfinex:

Cryptocurrency worth of $72 million was stolen from the Bitfinex exchange in August 2016. The exchange didn’t provide full information about the heist, which led to an atmosphere of chaos and confusion among investors. Bitfinex adopted extra safety measures in terms of providing BitGo wallet to investors having the multi-signature feature; it was surprising that scammers were still able to hack the exchange. This heist proved very expensive for the crypto domain as Bitcoin experienced a sudden crash of 20% in its value immediately after the scam was revealed to the public.

 

5) BitGrail:

Italian crypto exchange was scammed by hackers in February 2018, and the total amount of money lost was equivalent to $195 million.  The cryptocurrency stolen was Nano, and the event was considered an unfortunate one also because Nano was doing quite well at the time of the scam. Nano coin was considered as one of the promising cryptocurrencies back then, but with this theft, the expectations of this digital coin making big in the crypto industry dashed to the ground.

 

6) Coinrail:

South Korea’s cryptocurrency exchange Coinrail revealed in June 2018 that it lost ERC-20 tokens worth $40 million to scammers. However, the exchange announced that around 70% of its assets were safe as they had already been moved to cold storage. About two-thirds of the remaining 30% of the assets were frozen by the exchange, while one-third of lost assets went under investigation procedure.

 

7) Nicehash:

The scam exacted on Nicehash was different from others. Nicehash is a mining service and unlike other times when scammers use to target cryptocurrency exchanges, this time, the aim of the hackers was on the mining service. The scam executed in December 2017 resulted in a loss of $60 million, but in August 2018, it was reported that Nicehash was returning funds to around 60% of the scam victims.

 

Conclusion

It can be safely concluded that most of the time, cryptocurrency hacks happened because of the security breach associated with hot wallets. This also partly explains why most of the cryptocurrency exchanges are now resorting to cold storage options, which are considered safer than the internet-connected wallets. Along with the safety precautions, cryptocurrency exchanges also need to make sure they keep updating their security procedures and mechanisms so that any nefarious attempt to loot investors can be stopped effectively.

 

MT: Here Are Some of the Biggest Crypto Hacks in History

MD: We have witnessed some of the biggest heists in the cryptocurrency domain that has put a huge question mark on the credentials of safety measures.

 

WC: 812