This is a trip down the memory lane so be prepared.
Newbies will have a chance to learn some of the biggest Bitcoin heists ever and what was their outcome! As for you oldfags, think of it as a throwback article which will bring you memories of bygone eras of past greatness and failure.
I will try to keep this article chronological, starting with some of the earliest Exchange hacks and moving to now. This list is not exhaustive by any means as there are so many hacks that it will take pages and pages to list and analyse them all.
Now let's start!
Mt Gox
February 2014 (or should I say 2011?!), Mt Gox, registered in Japan was the largest bitcoin exchange of the time. According to the data it was handling more than 70 percent of bitcoin transactions. The hack was so massive that Mt. Gox lost more than 850,000 bitcoins going bankrupt in the process. In total investors using Mt Gox lost more than $450,000,000 during the heist in 2014 prices which in today's bull market with a Bitcoin price near $60,000 would count up to more than 44 trillion dollars. The silver lining is that a part of the stolen Bitcoin was eventually recovered. Mt Gox's story is that of cautionary tale since later revelations showed that the hacking against it had started since 2011 and the company had lost most of its Bitcoin by 2013. In the end its owner Mark Karpeles was arrested for fraud and embezzlement. He went to prison in 2015 but his charges were not directly related to the Mt Gox hack, only to be released on bail a year later.
As of now the case is still under investigation while Mt. Gox remains under bankruptcy protection.
Poloniex
2014 was a tough year for crypto exchanges. During the same year as Mt Gox, Poloniex another of the big exchanges announced via Twitter that it had been hacked. The company did not declare what was the exact number of Bitcoin's lost, but it said on its official communications that it was a 12.3 percent of the total amount held by its customers. What transpired then, was the decision to reduce the funds of all Poloniex users by 12.3 percent in order to split the loss and that there was no "bank run" to withdraw the funds from the remaining non-affected users. It seems that Poloniex was also target of hacking attacks prior and after the major attack as has been reported in forums and other news.
Bitfinex
The year is 2016, and Bitfinex announced that a security breach resulted in it losing 72 millions dollars that was stolen from its costumer accounts. In total roughly 180,000 Bitcoin's were lost that with today's price would be worth more than 10 trillion dollars. Contrary to Mt Gox Bitfinex managed to avoid bankruptcy. The Hong Kong based company cooperated with international authorities to track the perpetrators of the hack. It also spread the loss in all client accounts, with the latter losing an average of 36 percent of their assets. To compensate they issued the equivalent BFX tokens for every dollar lost and RTT tokens for those who traded their shares for iFinex, the parent company's shares. The RTT tokens were tied to their holders being eligible to be refunded the amount of hacked Bitcoin assets that would in the future be recovered by the company.
NiceHash
Exchanges are not the only ones that are endangered by hacking as was proved by the NiceHash hack. In 2017, one year after the Bitfinex hack, another major hacking attack took place, this time against a mining marketplace, the Slovenian based NiceHash. In total more than 4,700 Bitcoins were lost with a value of more than $ 64,000,000 millions around the time it happened as reported by Reuters. The company for the next three years undercut its own profits in order to repay the users who lost their bitcoin. It looks like the hashpower-renting firm managed to bounce back by what its executives said was the biggest theft in Slovenian history.
Binance
Fast forward to 2019 and Binance, one of the biggest Exchanges around gets attacked. The hackers managed to steal more than 7,000 Bitcoins with a value of $ 44,000,000. Bitcoin was not the only thing the group behind this well orchestrated hack stole from Binance, they also stole users' 2 Factor Authentication codes and API tokens. In total the hack represented only 2 percent of its Bitcoin holdings and the company decided to cover the losses itself through its Secure Asset Fund for Users.
Conclusion
All these cases show that your funds are NEVER 100% safe in an Exchange and with a third party. The best way to be protected is to keep your bitcoins in a cold wallet that is USB like and acts as physical store for your tokens. The first Bitcoin billionaires, the Winklevoss twins who also own the Gemini Exchange went to great lengths to protect their Bitcoins. Apparently the brothers distributed in small snippets of print-outs their wallet private keys to different safe deposits across the US. I am not suggesting to go their way, you probably are not holding as much as them (!?) but it is always better to be safe than sorry.
PS: Remember these are not the only cases of large bitcoin heists from exchanges and third parties. There was also the Bitstamp hack, the Bitfloor hack and others but if I kept adding more this article would have been way too long!
PS2: The Mt G0x hack was such a landmark event when it happened that you probably can write a whole book analysing it! So if you have some time, look it up.
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