Bitcoin Payment Processor’s $1.1 Million Theft May Have Been Inside Hacking Job, According to Blog

bitcoinBitcoin payment processor EgoPay was hacked in late December, according to the company’s Jan. 22 blog post.

Although the initial prediction was a loss of $1 million to $1.5 million for the company’s Bitcoin customers, former EgoPay CEO Tadas Kasputis admitted that the total lost in the hack was $1.1 million.

Whoever was responsible for the hack interfered with a number of the transactions, recorded in a general ledger for all to see.

EgoPay explained that the hack was carried out when “false values were made available in the merchants platform, when no actual value was transmitted in EgoPay.” The hacker then converted the fake value into irreversible currencies within a one-hour window in order to steal the money from merchants’ accounts.

Several customers, including both clients and payment processing centers, have confirmed that their accounts have been frozen following the hack.

Although the hacker or hackers have not yet been identified, the company suspended a number of its staff members after concluding that the hack had to be an inside job.

“Rightfully, people are upset at us,” a company representative wrote in the blog post. They blamed their failure to communicate on the issue and said, “We take full responsibility on this.”

In addition to the announcement, Kasputis stepped down as CEO of the company following the hack, though it is unknown whether he still works for EgoPay. The company plans to hire new employees to rebuild its reputation among clients and partners.

The blog post also alleges that the company’s owner, Amir Aziz, had previously embezzled money from the company, as was discovered after an investigation on Jan. 5. Aziz also deleted his EgoPay accounts shortly after, likely to cover his tracks, according to the blog.

“Bitcoin is a digital wallet, which is valued at today’s digital rates anywhere about $275 for each bitcoin, which are on your computer,” said Indranil Chatterjee from business development and ecommerce at BNA Smart Payment Systems Ltd. “So, if you have quite a number of bitcoins – you have considerable money just sitting there.”

Bitcoins are considered a decentralized cryptocurrency that don’t require regulation from financial institutions. They don’t require any identification to use, just an anonymous Bitcoin address, and they are used mostly for online transactions.

Although that lack of regulation has attracted criminals and Ponzi schemes in the past, other Bitcoin-related companies have received monetary backing from established financial institutions.

“It’s surprising that in today’s business of digital era, where people have the all the desired security levels available through encryption and secured socket layers of e-commerce transactions, they still choose to deal in bitcoin wallet resulting in losses worth more than millions,” said Chatterjee.

Another payment processor, CoinBase, announced on Jan. 20 that it has received a total of $75 million from the New York Stock Exchange, USAA Bank and Spanish banking group BBVA, according to Reuters.

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