The Mt Gox hack incident was huge back then. To this day, the unfortunate event is still the biggest Bitcoin hack in history so here's what you need to know.

Mt Gox Hack Incident

The Mt Gox hack incident has become the talk of the street for years. It was one of the biggest and successful bitcoin companies until its downfall in 2014.

Here we are going to cover the full story along with the takeaways from the major scandal so that we can learn how we should always put importance on safety when it comes to crypto trading.

Before Mt Gox was sold to Mark Karpeles in 2011 after it was built by Jed McCaleb in 2010. It only took 3 years after the acquisition for the company to become the biggest Bitcoin exchange at that time.

In 2013, Mt Gox was able to dominate the Bitcoin exchange business, covering 70% of all Bitcoin transactions around the world. However, this success was soon turned into a nightmare when in early 2014, Mt Gox was announced bankrupt.

 

Mt Gox Hack Incidents

There are two major hacks that Mt Gox went through before it eventually collapsed. The first hack appeared in 2011 and cost hot wallet private keys that were stored in the wallet.

Because of that, the hackers were able to take over the Mt Gox auditor's account. It was estimated that the hacker took 2000 BTCs when the Bitcoin price was down to 1 cent. Aside from that, these hackers also bought 650 BTC from Mt Gox customers.

Shortly after the first hack, Mt Gox secured their website. However, news from the inside said that the actions that were taken weren't enough.

Numerous employees shared that the company was a mess. The lack of good management and disorganization put the company at high risk.

Even after the attack, the company didn't use the standard tool and software that would make the developer team work at ease. Instead, the Mt Gox team frequently overwrote each other's works and files which made the job inefficient.

Not only that, Mark Karpeles was the only one who had access to Mt Gox source code, which meant any security updates and bug fixes would need his approval that could make his staff wait for weeks.

All these disasters inside the company make Mt Gox unprepared for the second and one of the biggest Bitcoin hacks in the world.

It happened quickly in February 2014 where more than 850,000 Bitcoins were gone which was valued at $460 million. About 750,000 Bitcoins belonged to Mt Gox customers.

As if this wasn't enough, the US Department of Homeland stated that Mt Gox subsidiary was without a US license. Hence, the US government seized over $5 million from Karpeles' company.

On top of these hacks, Mt Gox also lost $75 million back in 2013 with Coinlab, which was Mt Gox's former business partner. The reason being was Coinlab was supposed to take Mt Gox's American clientele but it never came to fruition.

 

The Hacker

It was reported that the hacker behind the Mt Gox hack was a Russian named Alexander Vinnik.

In 2017, he was sentenced to jail for 5 years and according to a Bitcoin security specialists platform, Wizsec, Vinnik was one of the many people who did the same money laundry to Bitcoinica and Bitfloor.

 

What Happened After

After the major hack incident in 2014, the website was shut down and Mt Gox was declared bankrupt in Japan and later in the US.

However, there were some talks about Karpeles himself as the reason for his business bankruptcy. Some anonymous employees said that in addition to the Mt Gox hack incidents, Karpeles' ways to run the business also caused the company to go down.

mark karpeles

Sources from inside told that Karpeles thought highly of himself and claimed himself as the king of Bitcoin. He loved to talk about how he had a high level of IQ and be part of Mensa.

His arrogance affected the way he led the business. His recklessness to ignore the red flags left the company unprepared to face the second hack.

 

The Important Takeaways

There are some lessons that can be gathered in order to prevent losing money in cryptocurrency or Bitcoin trading.

One needs to be aware that this is unlike other financial investments and there is a chance that the law that deals with bankruptcy is unable to provide reliable compensation schemes.

After the Mt Gox hack scandal, the Bitcoin community has tried to prevent things like this from happening again in the future.

However, hackers would always be able to find ways to steal the money in some other ways. So if someone wishes to trade using Bitcoin, they need to willingly put in the hard work of preparing themselves.

 

Choose Exchanges Carefully

One way to secure Bitcoin investment is by choosing a trustworthy and transparent exchange. Be careful when investing in new platforms.

It is better to do independent research instead of following what other people are saying. By doing further research, one will develop a deep understanding of cryptocurrency and learn how to protect themselves from potential frauds.

Bitcoin trading is mainly revolved around cryptocurrency exchanges. There is a high chance that what happened to Mt Gox will resurface.

So, it's highly recommended to consider the platform's exchange as a medium to trade Bitcoin, not to store the coin for a long time.

 

Manage Your Bitcoin Wisely

Back during the Mt Gox heyday, many people were unaware that they were actually depositing their assets in large amounts of money.

By storing their money or Bitcoin at once in one account, it will become an easy target for hackers. Diversify your Bitcoin allocation so when bad things happen, you will not lose all of your assets.

Make sure to regularly withdraw the money or put the coins in another wallet, and never leave all of your assets in an exchange platform.

 

Protect Your Private Key

Even though the crypto industry is getting regulated in certain areas, 33% of Bitcoin businesses were hacked and the problem was always the same. In fact, cybersecurity issues have always come from the use of keys and transactions on the blockchain.

According to Wall Street Journal, there's a total loss of $1.7 billion in cryptocurrencies because of hackers. Once they're able to get access, all the assets can be stolen.

Thus, make sure that the private key is secured because it shouldn't be shared with anyone. As already mentioned above, one of the major problems in cybersecurity is the use of the key.

If someone else knows the key to one Bitcoin or any cryptocurrencies, it can lead to losing a huge amount of money and this is the least one could ever hope for in any trading.

 

Other Important Measures

If someone wants to avoid a huge risk while investing their money, try to trade cryptocurrency as CFD or other options, such as futures or ETFs. Also, be careful when checking email because some scams might contain ransomware attacks.

Good safety should be someone's priority. Having a device that is protected from any harmful malware that could steal the money is also a good prevention measure to take.

Not having a secure device is like opening the door to let the attackers take over the account currently used in any marketplace.

 

Bottom Line

At the end of the day, law enforcement and crypto trading still need to be updated in order to adapt to rapid changes in technology.

Hackers will always find a way to find the weakness and create damage. The race between cybersecurity and hackers will always be there as long as the system is online, be it in cryptocurrency trading or any traditional banking which has an m-banking alternative.

Though blockchain technology continues to improve its security, as a trader, one needs to be fully aware when deciding to join a particular exchange. Cryptocurrency is a safe trading option, but cybersecurity is as essential as the value of the assets.

If one wishes to trade using Bitcoin, be cautious to not let any data get exposed. What happened to Mt Gox is proof that even a successful and big company could meet its downfall due to the lack of safety enforcement.