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Cryptocurrency Exchange Gatecoin Lost $2 Mln In Hot Wallet Breach

Gatecoin, the Hong Kong-based regulated and secure financial institution for blockchain assets, has lost ETH 185,000 and BTC 250 (which is equivalent to USD 2 million), representing 15% of its crypto-asset deposits, in the recent hot wallet breach that came to light last week.

CEO Aurélien Menant made the announcement in an online post. He said that on the night of May 9, Gatecoin experienced a disruption of its service caused by a server reboot and it strongly believes that the breach is linked to this event. The breach took place between May 9 and May 12, 2016.

Menant added that last Friday, the team detected some suspicious transactions and immediately suspended its services to investigate, and to prevent any more unauthorized access to the ETH and BTC hot wallets.

“We have previously communicated the fact that most clients’ crypto-asset funds are stored in multi-signature cold wallets. However, the malicious external party involved in this breach, managed to alter our system so that ETH deposit transfers by-passed the multi-sig cold storage and went directly to the hot wallet during the breach period. This means that losses of ETH funds exceed the 5% limit that we imposed on our hot wallets”, he explained.

Gatecoin has approached professional cyber security firm, Tehtri Security, to investigate the breach. He went on to suggest that Gatecoin’s system will be moved to a new, clean, thoroughly tested, and monitored infrastructure before services can resume. The website continues to be offline at the time of writing.

Menant said that a bespoke platform designed to enable all Gatecoin clients to withdraw their remaining funds in BTC, DAO, DGD, REP, USD, EUR and HKD will be released on May 28, 2016. However, the exact date when withdrawals for clients’ ETH funds will be available has yet to be confirmed.

“All DGD, REP and DAO funds are secure and Gatecoin has funded the DAO contracts for DAO token holders. 5% of all BTC funds were compromised in the breach, but 95% remain stored in multi-sig cold wallets along with the remaining crypto-assets”, he said. “All fiat currency funds held in USD, EUR and HKD are secured in segregated client accounts and can be withdrawn by clients after May 28, 2016”.

Menant further said that the Gatecoin team is currently working on raising additional funding to cover the losses of BTC and ETH and hopes to be able to reimburse all customers that have experienced losses as soon as possible.

The news follows the recent addition of Slock.it and DigixDAO tokens on Gatecoin’s platform. The exchange listed Slock.it and DigixDAO tokens on its exchange platform, which can be traded against various fiat currencies, as well as Bitcoin, Ethereum, and Augur.

Last month, cryptocurrency exchange platform ShapeShift.io announced that it lost roughly $230,000 lost, cumulatively, in three hacks within a month. Following the breach, the company has decided to scrap the old infrastructure and rebuild in a wholly new and safe environment.

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