17% of Bitcoin reserves stolen: South Korean exchange Youbit was hacked and declared bankruptcy

Rage Review : South Korean cryptocurrency exchange Youbit announced yesterday that it suffered its second hacker attack this year. The exchange's hot wallet was breached, directly causing it to lose nearly 17% of its assets. At present, the exchange has filed for bankruptcy. Although Youbit is small in scale and will not have much impact on the entire ecosystem, with the continued rise in the market value of cryptocurrencies this year, cryptocurrency exchanges have become more and more targeted by hackers, and centralized order-based exchanges have become the center of failure in the market. The collapse of any major exchange is likely to have a chain reaction on the global ecosystem.

Translation: Clover

South Korean cryptocurrency exchange Youbit has filed for bankruptcy after being hacked for the second time this year.

Youbit files for bankruptcy after second hack this year

Seoul-based Youbit published an announcement on Tuesday morning informing users that hackers had successfully breached the exchange’s hot wallet, resulting in a loss of nearly 17% of their assets.

This is the second time Youbit has been hacked this year. In April, nearly 4,000 bitcoins were stolen from the exchange in an attack that South Korean authorities attributed to North Korea, according to Reuters.

Youbit said it strengthened its security strategy after the April hack, keeping the remaining 83% of exchange funds securely in cold wallets. Despite this, the company that operated the exchange, Yaipan, filed for bankruptcy on Tuesday and stopped trading on the platform.

The announcement showed that the exchange wrote down the value of all customers' assets to 75% of the market value, which customers can withdraw immediately. The company said it would repay the remaining funds at the end of the bankruptcy process, when it would file an insurance claim and sell the company's operating rights.

Bitcoin exchanges become failure centers

While South Korea is one of the world’s largest cryptocurrency markets, Youbit is a small exchange with minimal trading volume. Therefore, the exchange’s collapse had minimal impact on the wider ecosystem. However, order-based exchanges have become the epicenter of market failures, and the continued rise in the price of cryptocurrencies such as Bitcoin has made them an increasingly attractive target for hackers.

Although cryptocurrency trading is spread all over the world, almost all trading volume in individual markets is concentrated on a few exchanges. For example, Bithumb handles nearly 70% of the cryptocurrency trading volume in South Korea. A successful breach of any of these major exchanges would be a heavy blow to the regional market and could have a ripple effect on the global ecosystem.

However, users must be extremely careful whenever they store their funds with any centralized service provider. Last month, cloud mining service provider NiceHash was hacked, resulting in the theft of more than 4,700 bitcoins, which is worth about $86 million at the current exchange rate.