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Alberta-based bitcoin bank closes after being ‘robbed’ by hackers

Another online holder of the virtual currency known as bitcoins is shutting down, after hackers made off with the equivalent of about $670,000 from the Alberta company.

Flexcoin Inc., which bills itself as the "first bitcoin bank," told users on its website on Tuesday that it was winding up operations after the theft on Monday of 896 bitcoins.

"Flexcoin is shutting down," the notice reads, saying the site "was attacked and robbed of all coins in the hot wallet," or an area of the site that provides users instant access to bitcoins.

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"As Flexcoin does not have the resources, assets or otherwise to come back from this loss, we are closing our doors immediately."

Flexcoin, which could not be reached, said on its site that it would "attempt to work with law enforcement to trace the source of the hack."

On its Twitter account on Tuesday afternoon, Flexcoin said it was "planning to release the details of the hack this evening."

The incident follows the collapse last month of the much-larger Tokyo-based bitcoin exchange Mt. Gox, which filed for bankruptcy protection and has also claimed that hackers may be to blame for $425-million worth of missing bitcoins.

The collapses are fuelling doubts about the notion of a virtual currency and are highlighting the risks of investing in bitcoins.

Flexcoin says on its website that it is a bank. It says it does not lend out its users' bitcoins but makes money on fees when customers transfer bitcoins.

Users who put their coins into "cold storage" – where they are typically held offline and not instantly accessible via the Internet – will be contacted by Flexcoin, the website says; they will get those bitcoins back, as they remained secure.

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Other users, the site says, should refer to Flexcoin's terms of service, which state: "We have taken every precaution to defend your bitcoins from hackers and/or intruders. However, Flexcoin Inc. is not responsible for insuring any bitcoins stored in the Flexcoin system."

On Feb. 25, as concern mounted about Mt. Gox's troubles, Flexcoin's Twitter account – which has just 194 followers – reassured its users: "We hold zero coins in other companies, exchanges, etc. While the Mt. Gox closure is unfortunate, we at Flexcoin have not lost anything."

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About the Author
Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More

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