Bitcoin mining company says it was hacked, possible theft worth millions

Last Updated Dec 8, 2017 12:59 AM EST

A bitcoin mining company in Slovenia said it had been hacked for the possible theft of tens of millions of dollars. As the price of the virtual currency soared past $17,000, NiceHash, a company that mines bitcoins on behalf of customers, said it is investigating a security breach that may have resulted in the theft of about $70 million worth of bitcoin.

The company said it would stop operating for 24 hours while it verifies how many bitcoins were taken.

Research company Coindesk said A wallet address referred to by NiceHash users indicates that about 4,700 bitcoins had been stolen. NiceHash said it will stop operating for 24 hours while it verifies how many bitcoins were taken. Wallet is a nickname for an online account.

Bitcoin reached a record price in U.S. trading Thursday, rising to more than $19,000 only to fall sharply within minutes, settling near $17,000 early Thursday afternoon. Still, that price represented an increase of more than $5,000 in less than 48 hours for the digital currency. 

That places the value of the entire crytocurrency market at more than $400 billion, according to Coinmarketcap.com.

Bitcoin plummeted more than 12 percent in volatile Asian trading Friday, dropping below the $15,000 level after touching a record high above $16,000 earlier in the session, according to the Reuters news service. "It was still up more than 30 percent for the week, as investors debated about whether the cryptocurrency was in a  bubble that was about to burst.," Reuters said.

At the start of the year, one bitcoin was worth less than $1,000. Coinbase, the largest bitcoin exchange, at one point tweeted that record-high traffic had caused interruptions to its service.

Research company Coindesk said that a wallet address referred to by NiceHash users indicates that about 4,700 bitcoins had been stolen. At Thursday's record price of about $16,200, that puts the value at over $76 million.

There was no immediate response from NiceHash to an emailed request for more details.

"The incident has been reported to the relevant authorities and law enforcement and we are cooperating with them as a matter of urgency," it said. The statement urged users to change their online passwords.

Slovenian police are investigating the case together with authorities in other states, spokesman Bostjan Lindav said, without providing details.

The hack will put a spotlight on the security of bitcoin just as the trading community prepares for the currency to start trading on two established U.S. exchanges. Futures for bitcoin will start trading on the Chicago Board Options Exchange on Sunday evening and on crosstown rival CME Group's platforms later in the month.

bitcoin-dec-7.png

Bitcoin and other cryptocurrencies have transformed from an esoteric idea hatched on the internet to the financial world's mainstream with market valuations that eclipse some publicly traded corporations, including Goldman Sachs (GS). Bitcoin prices were $960 at the start of the year. In 2010, they were 8 cents. 

That has increased the sense among some investors that bitcoin is gaining in mainstream legitimacy after several countries, like China, tried to stifle the virtual currency. 

The swings in price occurred just as the trading community prepares for bitcoin to start trading on two established U.S. exchanges. Futures for bitcoin will start trading on the Chicago Board Options Exchange on Sunday evening and on the Chicago Mercantile Exchange a week later.

The Futures Industry Association, which represents Wall Street's biggest banks and clearing houses, sent a letter to the Commodities Futures Trading Commission, saying that as the guarantors of customers trades, they should have been consulted before trading in bitcoin futures was approved. They expressed concern that the extreme volatility tied into bitcoin could leave banks exposed when the futures move too violently.

Bitcoin is the world's most popular virtual currency. Such currencies are not tied to a bank or government and allow users to spend money anonymously. They are basically lines of computer code that are digitally signed each time they are traded.

A debate is raging on the merits of such currencies. Some say they serve merely to facilitate money laundering and illicit, anonymous payments. Others say they can be helpful methods of payment, such as in crisis situations where national currencies have collapsed.

Miners of bitcoins and other virtual currencies help keep the systems honest by having their computers keep a global running tally of transactions. That prevents cheaters from spending the same digital coin twice.

Online security is a vital concern for such dealings. In Japan, following the failure of a bitcoin exchange called Mt. Gox, new laws were enacted to regulate bitcoin and other virtual currencies. Mt. Gox shut down in February 2014, saying it lost about 850,000 bitcoins, possibly to hackers.