Bitfinex users to share 36% of bitcoin losses after hack

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Bitfinex has told users they will share losses amounting to tens of millions of dollars equally

People who stored bitcoins at a popular exchange have been told they will lose 36% of their assets following a cyber-attack.

Hong Kong-based Bitfinex, where many users had stored the virtual currency to be used in transactions, said it lost up to $65m (£49m) in an attack.

The impact of the loss will now be shared across the site’s users.

One Bitcoin expert said the move to “socialise” losses had serious implications for digital currencies.

“Anyone who holds any asset at any exchange realises they’re part of the insurance plan for others,” said Emin Gun Sirer at Cornell University.

In a statement on its website, Bitfinex said, “We have decided to generalise losses across all accounts.

“Upon logging into the platform, customers will see that they have experienced a generalised loss percentage of 36.067%.”

More details of how this figure was reached would be published in the future, the firm added.

Customers were also told that they would receive a “BFX token” equal to their personal losses.

These tokens will eventually be exchanged either for repayment by Bitfinex or for shares in its parent company iFinex Inc.

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In 2014, large Bitcoin exchange Mt Gox collapsed – leaving many out of pocket

Bitfinex has said that a total of 119,756 bitcoins were taken by hackers.

In May 2015, 1,500 bitcoins were stolen in a previous attack on the exchange.

It is not the first exchange to have suffered.

Many users lost large caches of Bitcoin after they disappeared from the Mt Gox exchange, which then declared bankruptcy in 2014.

‘Rough’ times ahead

Following the news that Bitfinex had suffered a substantial loss of bitcoins, the price of the cryptocurrency fell by more than 20% – though it has since rebounded slightly.

“It’s going to be rough,” Dr Sirer told the BBC.

“I think we’re going to see a move towards models with better understood insurance.”

The “vast majority” of people held bitcoins in exchanges and online wallets, according to security expert Prof Alan Woodward at the University of Surrey.

“It’s a bit like your bank account having money taken from it and then your bank writing to all customers saying it will spread the losses across all of them,” he told the BBC.



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