Flexcoin Shuts After Bitcoins Stolen From Bank, Guardian Reports

Flexcoin, a Bitcoin bank, was forced to shut down after hackers stole 896 units of the digital currency, the Guardian newspaper reported.

Flexcoin shut its website and posted a statement yesterday detailing the loss after the March 2 theft, according to the newspaper. The company still had some Bitcoins in “cold storage,” meaning they were held in devices not connected to the Internet, the Guardian said.

The reported theft underscores security concerns over the virtual currency, which has no central issuing authority and uses a public ledger to verify transactions while preserving users’ anonymity. Mt. Gox, once the world’s largest exchange for the digital currency, filed for bankruptcy in Tokyo last week after losing 750,000 Bitcoins belonging to clients.

Bitcoin last traded at $657.02, according to prices shown on the CoinDesk Bitcoin Price Index, valuing Flexcoin’s lost holdings at about $589,000. Flexcoin executives didn’t immediately respond to requests for comment sent to e-mail addresses on the company’s website.

As Mt. Gox’s operations unraveled, U.S. and Japanese prosecutors opened investigations into the company while U.S. regulators began exploring ways to increase oversight of virtual currencies. The European Banking Authority said Feb. 28 it would create a task force to review ways to regulate Bitcoin and its derivatives.

Jinyoung Lee Englund, director of public affairs of the Bitcoin Foundation, an advocacy group for the currency, didn’t immediately respond to an e-mail seeking comment.

Flexcoin, based in Alberta, Canada, is working with law-enforcement authorities to find the hacker, Reuters reported today. The company will return Bitcoin held in ``cold storage'' to users, it said.

To contact the reporter on this story: Darren Boey in Hong Kong at dboey@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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