Bitstamp claims its bitcoins are secure after attack forces exchange shutdown

The exchange hasn't offered many details on the attack, except that it targeted an operational wallet

Bitstamp reassured customers that their bitcoins are safe after a weekend hack forced the exchange to shut down on Monday.

"As a security precaution against compromises Bitstamp only maintains a small fraction of customer bitcoins in online systems. Bitstamp maintains more than enough offline reserves to cover the compromised bitcoins," the exchange said in a statement on its website.

The hack, which took place Sunday, targeted one of Bitstamp's operational or hot wallets, the statement said. Hot wallets are connected to the Internet and used to immediately exchange the virtual currency. Bitstamp hasn't revealed details of the attack nor whether bitcoins were stolen.

Bitstamp customers, however, were told that the service was offline and not to make deposits to previously issued bitcoin deposit addresses since those transactions won't be honored.

"Bitstamp takes our security and soundness very seriously. In an excess of caution, we are suspending service as we continue to investigate. We will return to service and amend our security measures as appropriate," the statement said.

Bitstamp CEO Nejc Kodri took to Twitter to further stress to customers that their bitcoins were secure.

"To restate: the bulk of our bitcoin are in cold storage, and remain completely safe," he wrote in a tweet. Cold storage refers to the practice of keeping bitcoins in systems that aren't connected to the Internet.

Some bitcoin users have seen their accounts depleted after hacks decimated other bitcoin exchanges. In February 2014, Mt. Gox, once the largest bitcoin exchange, ceased operations after 850,000 bitcoins, then valued at US$474 million, were unaccounted for and allegedly stolen by hackers. Mt. Gox later said that 200,000 bitcoins had been located in a wallet with an older format. Last March, Flexcoin, which called itself the "world's first bitcoin bank," folded after attackers compromised a hot wallet and made off with 896 bitcoins worth around $600,000. Also that month, bitcoin exchange Poloniex revealed that an attacker stole 12.3 percent of its funds.

A separate tweet from Kodri said that Bitstamp is "working diligently to restore service" and the exchange expects to issue a service update later on Monday.

Fred O'Connor writes about IT careers and health IT for The IDG News Service. Follow Fred on Twitter at @fredjoconnor. Fred's e-mail address is fred_o'connor@idg.com

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