Bitcoin Exchange Hacked! Trading Suspended! Currency Could Be Worth Anything

How deep does this Bitcoin rabbit hole go? The virtual currency is looking less and less like videogame money and more and more like real world money. The BTC exchange Mt. Gox shut down over the weekend after a miniature version of Wall Street’s famous “flash crash,” in which high-frequency trading caused the Dow to drop 600 points. The BTC crash was caused by a massive sell-off that sent its value spiraling down to $.01 and then, somehow, into the negative, within minutes.

“The bitcoin will be back to around 17.5$/BTC after we rollback all trades that have happened after the huge Bitcoin sale that happened on June 20th near 3:00am (JST),” Mt. Gox says. “One account with a lot of coins was compromised and whoever stole it (using a HK based IP to login) first sold all the coins in there, to buy those again just after, and then tried to withdraw the coins. The $1000/day withdraw limit was active for this account and the hacker could only get out with $1000 worth of coins.

“Apart from this no account was compromised, and nothing was lost. Due to the large impact this had on the Bitcoin market, we will rollback every trade which happened since the big sale, and ensure this account is secure before opening access again.”

Mt. Gox and competing exchange TradeHill have suspended trading until the former repairs the breach and reverses trades that took place after the crash. Mt. Gox’s actions mirror those taken by the NYSE after Wall Street’s flash crash, during which some shares fell to a penny.

One of the co-founders of Mt. Gox is already hitting the PR circuit. He’s scheduled to appear today on the Bitcoin Show, the Midtown-based web series on all things BTC. Bitcoin Exchange Hacked! Trading Suspended! Currency Could Be Worth Anything