Financial News

  • 27 February 2014, 15:03

Bitcoin Cyber Attacks: 'US Probe Launched'

Federal prosecutors are reported to have launched an investigation into how Bitcoin exchanges and other businesses that deal in the digital currency handled recent cyber attacks.

Manhattan US Attorney Preet Bharara issued subpoenas to numerous companies that conduct business using Bitcoin, a source familiar with the probe told the Reuters news agency.

A spokesperson from Mr Bharara's office declined to comment.

In the cyber attacks - technically known as distributed denial of service attacks - hackers overwhelmed Bitcoin exchanges by sending them thousands of phantom transactions.

At least three exchanges were forced to halt withdrawals on February 7, including Mt Gox.

The Tokyo-based exchange - once the largest player in Bitcoin trading - has gone dormant, leaving customers unable to recover their funds.

Mt Gox has not confirmed the reported theft but a widely-shared document purporting to be a company "crisis strategy" said the firm might have lost more than 744,400 Bitcoins in a theft that had gone unnoticed for years.

Mt Gox's chief executive, Mark Karpeles, said on Wednesday that he is working with others to solve the company's problems.

He said: "As there is a lot of speculation regarding Mt Gox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues."

Authorities in Japan have said a multi-agency investigation into the alleged Mt Gox theft is under way.

Bitcoin, a form of electronic money independent of traditional banking, relies on a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every Bitcoin transaction that is made.

Investors deposit their Bitcoins in digital wallets at specific exchanges, meaning the Mt Gox shutdown is similar to a bank closing its doors, leaving customers unable to retrieve their funds.

The cyber attacks contributed to a substantial decline in the price of Bitcoin, though the digital currency's value varies by exchange.

The losses were most dramatic on Mt Gox, where the digital currency fell to about $135 (£81) from $828.99 (£498) before February 7.

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