Cryptsy confirms hack and wont withdrawal money

[kingscrown]

http://blog.cryptsy.com/post/137323646202/annoucement

official post by them.

I have predicted this when they banned me from chat - https://twitter.com/kingscrownBTC/statu ... 8613891072

[Acidyo]

Ouch, that's not good, that's not good at all. :/

[bitkilo]

So it now looks like a dodgy developer from Lucky7Coin may be the culprit here.
I could tell from his email below that he is up to no good, have a look. He actually said I'm responsible and you do not have to be afraid. This would be a pretty clear sign to me that something is not right.

Lucky7Coin is not maintained and I would like to take care of it. I have announced that on bitcointalk.org in Lucky7Coin thread. You’re the only exchange for this coin and I hope you will let me take care of it. I’m responsible. You don’t have to be afraid of errors or forks. I’m developing multipool and I know bitcoin internals and protocol.

It looks like they have know about this problem for a long time and have been running their business more like a ponzi than an exchange ever since it happened on 27/09/2014.
This is an extremely bad business practice and even if they do manage to keep the exchange running after this i don't think they will be getting much business anymore.

Hope this does not turn out to be another loss story for those involved, it would not be good for them or bitcoin.

[bitkilo]

I think it is a good idea to copy the Cryptsy letter to this forum for our members to read. I had to read it twice just to make sure i read it correctly.
For a big exchange this letter really makes them sound like a 2 bit operation and not a company that handles millions of dollars worth of BTC.

Announcement
Cryptsy has had problems for some time now and it’s time to let everybody know exactly why. These problems were NOT because of any recent phishing attacks, or even a ddos attack, nor does it have anything to do with me personally.
About a year and a half ago, we were alerted in the early AM of a reduction in our safe/cold wallet balances of Bitcoin and Litecoin, as well as a couple other smaller cryptocurrencies. After a period of time of investigation it was found that the developer of Lucky7Coin had placed an IRC backdoor into the code of wallet, which allowed it to act as a sort of a Trojan, or command and control unit. This Trojan had likely been there for months before it was able to collect enough information to perform the attack. It does not appear that this was the original developer for LK7, as on 5/22/2014, we received this message from the new developer who wanted to maintain the codebase:
—
Hello,
Lucky7Coin is not maintained and I would like to take care of it. I have announced that on bitcointalk.org in Lucky7Coin thread. You’re the only exchange for this coin and I hope you will let me take care of it. I’m responsible. You don’t have to be afraid of errors or forks. I’m developing multipool and I know bitcoin internals and protocol.
https://bitcointalk.org/index.php?topic ... msg6861797
For a start I’ve changed irc network, so clients could synchronize blockchain. Please upgrade as soon as you can.
Github repo:
https://github.com/alerj78/lucky7coin
Branch “master” will always be for stable version, branch “devel” could be dirty. In a 2-3 weeks I’ll release new version with p2pool support and checkpoints. Before that I’ll contact you to check few blocks hashes for checkpoints and make sure there is no fork.
I hope we can cooperate and make this coin live again!
Jack
—
These are the approximate figures taken:
Bitcoin: 13,000 BTC
Litecoin: 300,000 LTC
This of course was a critical event for Cryptsy, however at the time the website was earning more than it was spending and we still have some reserves of those cryptocurrencies on hand. The decision was made to pull from our profits to fill these wallets back up over time, thus attempting to avert complete closure of the website at that time. This worked fine for awhile, as profits decreased due to low volume and low Bitcoin prices, we would adjust our spending accordingly. It wasn’t until an article from Coinfire came out that contained many false accusations that things began to crumble. The article basically caused a bank-run, and since we only had so much in reserves for those currencies problems began.
Our current customer liabilities for BTC is around 10,000 BTC, so as you can see we would like to see the Bitcoins returned for both our users and for ourselves.
Here are the transaction details from the Bitcoin wallet:
https://www.walletexplorer.com/wallet/0c07e0bec1002bd2
As you can see, 2014-07-29 13:17:36 is when the event occurred. A very interesting fact here, however, is that those Bitcoins have not moved once since this happened. This gives rise to the possibility they can be recovered. In fact, I’m offering a bounty of 1000 BTC for information which leads to the recovery of the stolen coins.
If you happen to be the perpetrator of this crime, and want to send the coins back no questions asked, then you can simply send them to this address:
1KNi4E4MTsF7gfuPKPNAbrZWQvtdQBTAAa
If they are returned, then we will assume that no harm was meant and will not take any action to reveal who you are. If not, well, then I suppose the entire community will be looking for you.
Some may ask why we didn’t report this to the authorities when this occurred, and the answer is that we just didn’t know what happened, didn’t want to cause panic, and were unsure who exactly we should be contacting. At one time we had a open communication with Secret Service Agent Shaun Bridges on an unrelated matter, but I think we all know what happened with him – so he was no longer somebody we could report this to. Recently I attempted to contact the Miami FBI office to report this, but they instead directed me to report it on the I3C website. I’ve not heard anything from them.
I think the only real people who can assist with this are the people of the Bitcoin community itself.
Trades and withdrawals will be suspended on the site indefinately until some sort of resolution can be made.
Here are our options:
1. We shut down the website and file bankruptcy, letting users file claims via the bankruptcy process and letting the court make the disbursements.
- or –
2. Somebody else comes in to purchase and run Cryptsy while also making good on requested withdrawals.
- or –
3. If somehow we are able to re-aquire the stolen funds, then we allow all withdrawal requests to process.
I’m obviously open to any other ideas people may have on this.