Bitcoin exchange hacked

The Bitcoin community faced another crisis on Sunday afternoon as the price of the currency on the most popular exchange, Mt.Gox, fell from $17 to pennies in a matter of minutes. Trading was quickly suspended and visitors to the home page were redirected to a statement blaming the crash on a compromised user account. Mt.Gox’s Mark Karpeles said that the exchange would be taken offline to give administrators time to roll back the suspect transactions.

The extent of the compromise became clear when a copy of Mt.Gox’s user database began circulating online. The file included username, email addres, and hashed password for thousands of Mt.Gox users. Karpeles’s statement was updated to acknowledge the breach. He warned users who have re-used the Mt.Gox passwords on other sites to change them.

The crash appears to be the fault of the Mt.Gox exchange rather than a collapse in the value of the currency itself, as the integrity of Bitcoin’s underlying peer-to-peer transaction clearing process does not appear to have been compromised.

More problems for Bitcoin, although this just highlights the importance of account security – i.e. LulzSec.