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The Great Bitcoin & Crypto Heists:
A History (And an Alternative)

The Great Bitcoin & Crypto Heists - A History - Man stressed over phone


The Bitcoin and Crypto markets have been on a tear lately. I am very bullish on Bitcoin and Crypto, and I see this technology and investment asset changing the world and for the better. With this recent exploding market, there have been millions of new investors in the space. With reward comes risk. So, I have recently written a few articles regarding the dangers and pitfalls that can exist in this new and exciting space. In this article, I am going to cover the history of centralized exchange hacks. These are exchanges, like Binance, Kraken, Coinbase, Gemini, or KuCoin, where you can buy, sell and trade Bitcoin and other cryptocurrencies. They are private businesses, and they have been at the forefront of bringing cryptocurrency to the world.

Before you get the idea that I think all exchanges are bad, let me tell you, I don’t think they are.

But I feel the following metaphor is appropriate.

Exchanges are like a public bathroom — you go in, do your business and get out. I like this metaphor because it describes a healthy attitude instead of the extremes of being too scared or too careless.

There have been some major hacks/exit scams over the years that have resulted in a lot of people thinking that their money was safe losing it all. In this article, I give a brief history lesson and some potential solutions.

The History of Hacks

The Great Bitcoin & Crypto Heists - A History - Coding Laptop

In 2011, Mt. Gox was hacked and lost 2,609 Bitcoin (currently worth $159 million). The price of Bitcoin plummeted to $0.01. They managed to continue to operate and, by the time of their 2nd hack, were handling 70% of worldwide Bitcoin transactions.

In February 2014, Mt. Gox froze all withdrawals and announced they lost 850,000 Bitcoin, worth $350 million at the time, and as of this writing, worth over $51 billion. Turns out the hackers had been regularly stealing Bitcoin from their wallet since 2011, and the CEO was falsifying records to hide the losses. They never re-opened and eventually recovered 200,000 Bitcoin, and legal measures in Japan have been ongoing for years to compensate the victims.

In August 2016, Bitfinex was hacked and lost $77 million in BTC. It took nearly three years for authorities to track the two brothers they believe to be responsible for the hack. The brothers allegedly created clones of major cryptocurrency wallets and exchanges, then sent the clones to phishing sites. Everyone who had currency stolen from their wallet has been reimbursed, and Bitfinex is still in operation.

In 2018, Coincheck lost about $533 million worth of NEM tokens to hackers in 2018 and remains the biggest contemporary amount hacked ever. The reason for the hacks comes down to a lack of security. Hackers were able to access the funds and transfer them relatively easily. The hack led to new security measures across crypto exchanges, and Coincheck is still in operation.

In February 2018, BitGrail was an exchange in Italy that shut down for good. Hackers stole $187 million worth of Nano. There was some speculation that the hack was all a hoax created to cover up asset mismanagement. A court ruled that BitGrail was at fault for not properly securing investors’ wallets and ordered former BitGrail CEO Francesco Firano to return as much of the stolen money as possible to investors.

One of the strangest incidents happened in December 2018. QuadrigaCX was thought to be the largest cryptocurrency exchange in Canada. Its founder, Gerald William Cotten, aged 30, reportedly died in India. Following this, it was reported that none of the funds were accessible because only he had the passwords. Once this was accessed, it was found that, in fact, there were 250 Million Canadian Dollars ($180 Million) of funds missing, belonging to 115,000 customers. According to Chainalysis, a cryptocurrency tracking firm, it appears the money was never invested in Bitcoin and quickly went missing.

In early 2019, New Zealand exchange Cryptopia famously fell victim to a security breach with hackers managing to siphon $11 million worth of digital assets from the exchange. It attempted to re-open two months later but was forced into liquidation in May as a result of the brand being tarnished by the breach.

In 2019, Binance was hacked and lost $40 million in Bitcoin. This was caused by a security breach where the hackers accessed two-factor authentication codes and API Keys. Binance covered their losses and invested in increased security measures and is today the world’s #1 exchange by volume.

In September 2020, KuCoin was hacked and lost $281 million of cryptocurrencies, recovering 84% within 2 months, however, some of the projects whose cryptocurrency was stolen were negatively affected.


Had enough? Yeah, me too. I think you get the point. Here are some alternatives if you do not want to use centralized cryptocurrency exchanges.

Decentralized Exchanges

Numerous groups are focused on developing decentralized exchange (“DEX”) technology, and a number of different approaches have emerged over the years. These are growing in popularity and volume, especially since one of the original purposes of Bitcoin was to be decentralized.

Instead of trusting a for-profit business as an intermediary, such as Coinbase or Binance, the transactions are done directly on the blockchain between users’ wallets and are completed using smart contracts.

The main benefits of these are:

  • They do not require ID verification.
  • You have your crypto own wallet & private keys; they are not stored on the exchange.
  • Transactions are recorded on the blockchain.

The main drawbacks are:

  • No DEX can yet trade between a cryptocurrency and fiat currency because fiat currencies inherently require a trusted central party to record account balances.
  • Liquidity & Volume. Depending on the exchange and the market, you may or may not be able to buy or sell as easily or as much as you want at the price available on an exchange that has a lot more volume.
  • Harder to Use. They do not have the user-friendly experience private businesses have been working on for years to attract customers.
Peer-to-Peer Exchanges

Like decentralized exchanges, these are peer-to-peer transactions and generally have the same privacy benefits and liquidity drawbacks. Another benefit is usually this allows sales between fiat and crypto.

The difference between this and a DEX is that these are generally not done on the blockchain, but are done using escrow. The exchange itself is still a trusted third party, receiving the currency from both parties and finalizing the transaction. An online example of this is LocalBitcoins.

Another intriguing example is the booming peer-to-peer marketplace in Beirut, Lebanon. Attempting to escape hyperinflation and currency controls from insolvent banks, many Lebanese are turning to Bitcoin to preserve their savings. This marketplace prevents scammers because the transactions are done in person at local coffee shops in Beirut. You can find out about this exchange here:

Private Wallets

Since this article is for beginners, I won’t go into too much detail, but this is where you store your cryptocurrency in your own wallet instead of an outside provider. You have the address as well as the private key. There are two major kinds — software wallets and hardware wallets. Software wallets are a desktop or mobile application, and hardware wallets are a device that looks like a flash drive.

The benefits include privacy and security. This removes any chance of a third party seizing your crypto. Advocates of wallets would say, “not your keys, not your cheese.” The main drawback is the potential of losing your private key. If this happens, you will not be able to recover your funds. Since you have the benefit of being your own banker, the drawback is that you don’t have anyone to call if your password is lost or destroyed.


Do you value these articles? Follow and share!

For an article an about how to easily and safely buy Bitcoin, check out this read.

For an article an about how to overcome the emotions of trading, check out this read.

This article is not investment advice, nor does it take your personal financial situation into account. Never invest more than you are willing to lose, and don’t buy Bitcoin or other investments on credit. I write about my observations and personal opinions with the purpose to share what I have learned with others.

Disclosure: I am invested in Bitcoin and other cryptocurrencies.


Alexandre Lores is a personal finance writer from Tampa Bay, Florida, with the goal to help one million people achieve financial freedom. He has spent over five years studying markets and economics, finding Bitcoin in 2017 and never turning back. He frequently appears on TV and in online news articles and is a regular Twitter spaces host.

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