Cryptsy on Verge of Bankruptcy After $7.5m Bitcoin Theft

Popular cryptocurrency exchange Cryptsy is on the verge of bankruptcy after the startup admitted that it had fallen victim to an online heist in July 2014, during which a total of $9.58 million-worth of Bitcoins and Litecoins. The company has been left with outstanding liabilities of around 10,000BTC – approximately $4.15 million – which, if not met, could result in the business winding up.

“About a year and a half ago,” a blog post from Cryptsy reads, “we were alerted in the early AM of a reduction in our safe/cold wallet balances of Bitcoin and Litecoin, as well as a couple other smaller cryptocurrencies.”

“After a period of time of investigation 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,” the post continues. “This Trojan had likely been there for months before it was able to collect enough information to perform the attack.”

The Trojan was able to steal around 13,000BTC ($7.5 million, based on the exchange rate at the time) and 300,000LTC ($2.08 million).

Cryptsy says that it did not disclose the theft at the time as it believed that it had enough cyptocurrencies in its reserve to make up the shortfall, supplementing that with its own profits. The site, though, has now failed to meet its outstanding liabilities. Unless Cryptsy can recover the stolen funds or can find a buyer to cover the shortfall, the company is set to declare itself insolvent.

Image courtesy of Bloomberg.