Monday, March 24, 2014

Vircurex: Another Imploded Bitcoin Exchange

The impolsion of MT Gox has been widely heralded as a sign of a new era of Bitcoin companies, but there are still examples of the unpredictable and shady side of the cryptocurrency world, as developments at Vircurex demonstrate.

The Beijing-based virtual currency exchange is much smaller than Mt. Gox, but it is notable that it has stopped withdrawals of Bitcoin, Litecoin and other coins today, and it will freeze all existing user accounts from Monday after running into serious financial issues.

Vircurex was hacked twice last year and had been using a reserve of ‘cold storage‘ currency to reimburse users whose balances were affected by the hacks. However, “large fund withdrawals in the last weeks… have lead to a complete depletion” of the reserves, the company says, meaning that it doesn’t have the funds to pay back affected users. (The exact amount lost to hackers was never made public by Vircurex.)

Rather than filing for bankruptcy, as Mt. Gox has done, Vircurex is locking down its existing accounts and has a strategy aimed at paying back all affected customers and returning the exchange to positive financial health.

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