All Bitfinex clients to share 36% loss of assets following exchange hack

Bitfinex, the cryptocurrency exchange that lost $72m (£55m) to hackers last week, has told customers they will lose just over 36% of the assets they had on the platform but will be compensated for these losses with tokens of credit.

The Hong Kong-based exchange said in a blogpost that losses from the theft would be shared, or “generalised”, across the company’s clients and assets, widening the group of those affected beyond those announced last week. “This is the closest approximation to what would happen in a liquidation context,” Bitfinex said on its website early on Sunday. “Upon logging into the platform, customers will see that they have experienced a generalised loss percentage of 36.067%.”

The company said it would also give all affected clients a “BFX” token crediting them for their losses that could be redeemed by the exchange or for shares in iFinex, the exchange’s parent company. The company suggested it was looking for investment to allow the credits to be redeemed. “We are actively discussing various strategic options with numerous potential investors as part of our strategy to fully compensate our customers. Such discussions, however, are in early stages and will likely take time to play out.”

Bitfinex said it would explain its methodology in a later update and that it was talking to investors about how to fully compensate its customers.

Hackers stole 119,756 bitcoins from Bitfinex last Tuesday in the second biggest breach of a cryptocurrency exchange ever, in US dollar terms. The hack accounted for about 0.75% of all bitcoins in circulation. This is the second attack on the Bitfinex exchange in less than two years – the last hack occurred in May 2015 and involved the loss of a more modest 1,500 coins.

The exchange is the world’s largest for trading digital currencies such as bitcoin, litecoin and ether, and is used for its deep liquidity in US dollar/bitcoin trades.

A major downward swing in bitcoin prices before the attack, from $650 a coin to about $600, has led to speculation that knowledge of an upcoming attack might have been leaked to the market beforehand. Following Bitfinex’s confirmation of a hack, bitcoin prices fell a further 20%.

It is still not clear how the hackers gained access to the company’s customer accounts.

However, both Bitfinex and outside experts have dismissed suggestions the breach was due to the security of the blockchain, the decentralised ledger that tracks every bitcoin transaction and which traditional banks are considering adopting to increase the speed and transparency of their transactions.

Bitfinex said last week it expected to “socialise” its losses across bitcoin balances and active loans to bitcoin/US-dollar positions. Its statement on Sunday, however, indicated a wider application of the losses to all accounts, which include other digital currencies.

On Sunday Bitfinex said customers should be able to log on to its platform within 48 hours.

A blockchain analysis company, Chainalysis, confirmed that it is helping to track the stolen bitcoins.

Source: https://www.theguardian.com/technology/2016/aug/07/bitfinex-exchange-customers-receive-36-percent-loss-tokens

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