BitFloor and Bitcoinica, the two
largest victims of digital theft in Bitcoin history, are making strides in
repaying their clients. A court filing made by Tihan Seale in August to place
Bitcoinica into receivership for liquidation was finally reviewed by a judge on
October 31. Anthony John McCullagh and Stephen Mark Lawrence were appointed as
liquidators. Subsequently, the liquidators reached out to creditors via email
and the Bitcointalk forums, requesting their address and contact details.
Meanwhile, BitFloor recently announced that it will refund 1.7% of its users’
lost funds, with further refunds planned as the exchange’s business grows.
In 2012, Pirate, Bitcoinica, and
BitFloor experienced significant mishaps within the Bitcoin world. Bitcoinica,
a margin trading platform launched by Zhou Tong in September, initially thrived
and became one of the largest exchanges after MtGox. However, a series of hacks
in the spring tarnished its reputation. The first hack in March resulted in
over $220,000 worth of BTC being stolen from Bitcoinica’s servers. Despite
receiving additional funding from investors, Bitcoinica faced another $90,000
hack two months later, leading to the deletion of its user balance database and
subsequent shutdown. The claims process was slow and complicated, with the team
sifting through evidence to distinguish legitimate claims from fraudulent ones.
Only a small portion of claims were paid out before the process stalled, and
the claims fund was even hacked due to poor security practices.
In the case of BitFloor, the
incident was less severe. In early September, a thief discovered an unencrypted
backup of the service’s wallet on the server, which had been accidentally left
there during a manual software upgrade. The thief made off with $250,000.
Founder Roman Shtylman managed to keep BitFloor operational by freezing the
Bitcoin balances of depositors at the time. The plan was to restore BitFloor’s
operations and generate enough profit to reimburse depositors.
These events severely shook the
confidence of the Bitcoin community. By September, many individuals had given
up hope of recovering their funds from these exchanges, especially Bitcoinica.
However, the appointment of legal liquidators for Bitcoinica brings a glimmer
of hope that depositors may eventually receive a significant portion of their
funds back. Due to the third theft in July, the compensation will not be 100%,
and anonymous Bitcoinica users will only receive a refund if they provide their
legal name and address to the liquidators. The estimated payout currently
stands at around 60-70%. Bitcoinica creditors, as well as non-creditors, are
advised to provide truthful information to the liquidators, as submitting false
claims could have legal repercussions.
A noteworthy aspect of this
chapter in Bitcoinica’s story is the recognition of Bitcoin as a legitimate
form of digital property. The liquidators’ post mentioned the possibility of
distributing funds either in the form of Bitcoins or as cash, marking the first
time a formal legal process has acknowledged and handled Bitcoins. This
development may help alleviate legal uncertainties surrounding Bitcoin
businesses and boost confidence among those working with the cryptocurrency.
The Bitcoin community has learned
valuable lessons from these unfortunate events and has taken steps to improve
security and focus on strengthening the underlying economy. Financial service
providers have implemented stronger security measures, such as two and
three-factor authentication and offline cold storage for client funds. The
community has also shifted its focus to fostering a resilient economy. If the
liquidation of Bitcoinica and the recovery of BitFloor continue positively,
these incidents could serve as a turning point toward a brighter future for the
Bitcoin community.
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