TODAY IN CRYPTO HISTORY

This week marks 11 years since the first major crypto hack and what would lead to the first major crash in crypto at the time.

On February 7, 2014, the Mt. Gox cryptocurrency exchange, once handling 70% of all Bitcoin transactions, suffered a catastrophic hack. Hackers stole 740,000 BTC from customers and an additional 100,000 BTC from the company, leading to its bankruptcy by the end of that month. The incident was preceded by security issues dating back to 2011, when the exchange first experienced a breach.

Background of Mt. Gox

Mt. Gox was established in 2010 by Jed McCaleb and quickly became the largest Bitcoin exchange in the world, handling approximately 70% of all Bitcoin transactions at its peak. The platform allowed users to buy and sell Bitcoin easily, contributing significantly to the cryptocurrency’s early adoption. However, despite its prominence, Mt. Gox faced numerous security issues and operational challenges throughout its existence.

Timeline of Events Leading to the Hack

• 2011 Breach: The first significant security incident occurred in 2011, when hackers exploited vulnerabilities in the exchange’s systems, leading to a loss of about 850,000 BTC. Although this incident was somewhat mitigated, it set a precedent for ongoing security concerns.
• Operational Struggles: Over the next few years, Mt. Gox experienced various operational difficulties, including transaction delays and customer complaints about withdrawals. These issues raised red flags within the cryptocurrency community regarding the exchange’s management practices.
• Increased Scrutiny: As Bitcoin gained popularity, regulatory scrutiny intensified. In 2013, the U.S. government seized funds from Mt. Gox as part of an investigation into its operations, further complicating its financial situation.

The Hack of February 2014

In February 2014, Mt. Gox announced that it had suspended all trading and withdrawals due to a security breach. It was later revealed that hackers had stolen approximately 740,000 BTC from customers and an additional 100,000 BTC from the company itself.

Key Details of the Hack:

Bankruptcy Filing: On February 28, 2014, Mt. Gox filed for bankruptcy protection in Japan, claiming liabilities of approximately $64 million and citing the loss of customer funds as a primary reason for its insolvency.

Exploitation of Vulnerabilities: The hackers exploited weaknesses in Mt. Gox’s security protocols, which had been known for years but inadequately addressed by the company. This included issues with transaction malleability, allowing attackers to manipulate transaction data and effectively double-spend coins.

Lack of Transparency: For nearly two years prior to the hack, Mt. Gox was technically insolvent but failed to inform users or regulators about its precarious financial situation. This lack of transparency contributed to the scale of the theft.

Despite tightening security measures, Mt. Gox was technically insolvent for nearly two years before the hack became public knowledge. Mismanagement and disorganization within the company contributed to its vulnerability. Following the hack, Mt. Gox claimed to have recovered 200,000 BTC but has since been entangled in legal disputes regarding asset recovery and creditor compensation.

In January 2021, a settlement was reached with CoinLab regarding the distribution of funds to creditors, but many users remain in litigation to recover their lost assets. The situation highlights significant lessons about the need for improved security and regulatory frameworks in the cryptocurrency industry, as well as the ongoing challenges faced by victims of such hacks.

---

Recommended:

👉 Sign Up for the Crypto Corner Newsletter and get more insight on the crypto markets, new releases and updates, plus my personal choice of coins to trade: https://www.ojjordan.com/crypto-corner

👉 LearnCryptoNow is the go-to place to get valuable resources and learn more about blockchain tech and all things crypto-related: https://www.learncryptonow.com/

📖Free Crypto eBooks: https://learncryptonow.com/freebies

---

Want to know how to make money by investing in crypto?
Grab a copy of my best-selling eBook “Learn Crypto” to find out all about the cryptocurrency market, the different blockchains and the “Do”s and “Don’t”s of how to build a successful crypto portfolio. It’s now in its second edition.

Find out more: LearnCryptoNow.com

---

“Crypto Wallets” is a Free eBook to guide you in choosing the right wallet for you. All the popular Hot and Cold Wallets are reviewed in this useful guide, most of which I personally use, or have used in the past. Self-custodial and custodial services too.

Find out more at: https://www.ojjordan.com/crypto

---

---