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BTC-e Hacked? Down for almost 24 hours… suspicious wallet activity

Eric Arthur Blair

There is a lot of discussion over the past day about the possibility that one of the oldest most trusted cryptocurrency exchanges BTC-e has been hacked. I personally have been a user there since 2011 and there is no exchange I would recommend more. It existed right in that sweet spot of being big enough to be efficient and have good trading volume, but not so big it would be an irresistible target to hackers. Additionally there were lots of rumors that the exchange was tied to some very powerful individuals which would create great disincentive for attackers to go after it.

Unfortunately at this time I am not very certain about their winning record preventing a centralized compromise of their exchange being maintained. It is not unprecedented that they have gone down for this period of time or longer for unscheduled maintenance, but there are a lot of circumstances this time which add additional suspicion to the circumstances. It is true that they may have a lot of work to do in preparation for the August 1st Segwit implementation into Bitcoin along with potential forks, but something like this would have been announced beforehand. The official BTC-e Twitter account claims this is simply unscheduled maintenance activity but there is sufficient reason to suspect this may not actually be the case.

The main piece of evidence of a hack is what is reported to be a BTC-e wallet address which has transactions consistent with a Bitcoin mixing process where the coins are sent out in many smaller transactions and later again consolidated to conceal the source and outputs. This activity can not be explained under the rubric of maintenance if it is indeed the address to the BTC-e wallet.
As you can see the above listed address has an extraordinarily large balance for anyone other than an exchange with activity consistent with a coin mixer going on until the time of this posting.

Main remaining output balance of the above address:

This, if it is in fact BTC-e’s wallet address, which seems to remain unconfirmed at this time is fairly irrefutable evidence that either the exchange was compromised or the controllers of the wallet have run with the balance. There is no other reasonable explanation for this transaction activity other than trying to obfuscate the end point and origin of the coins.

BTC-e as far as the public knows has only had one major centralized compromise once before on June 11th 2011, and they reimbursed all of their customers 100% for their losses. Unfortunately back then the value of the lost coins were a mere fraction of their modern day valuation, and I don’t think this is something they could afford to do this time, nor would it be a wise business move to do anything other than fold at this point. I wouldn’t hold out any hopes for reimbursement this time, and any funds not compromised will likely be caught up in bankruptcy court where the largest claimants will have first priority over the remaining funds.

I wish I could be more optimistic about this one, but I think we may have just witnessed the falling of a Bitcoin institution with BTC-e.


UPDATE: Now it is looking like it may be more likely one of the lead people at BTC-e may have been arrested for money laundering, and those in control of the wallet may have ran with the funds.

Could this potentially be related to BTC-e?
“Greek authorities say they have arrested a Russian man involved in $4B laundering operation since 2011”


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Eric Arthur Blair

Eric Arthur Blair