A 1,000 BTC Bounty Is the Perfect End to a Strange Week in Bitcoin

RIP Bitcoin, again.

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Jan 15 2016, 6:47pm

Image: Flickr/Simon Lesley

There's a manhunt for a hacker underway in the world of Bitcoin, and this time (yes, there was a last time) the bounty is nearly half a million dollars' worth of the virtual currency.

Cryptsy, a popular exchange for buying and selling bitcoins, announced the bounty in a blog post on Thursday, which also attempts to explain the company's numerous recent service interruptions: Cryptsy alleges it was hacked in 2014 and lost millions. Now, they want it all back, and they're willing to pay. The post also states that the exchange is suspending all trading "indefinitely."

At the time of writing, Cryptsy's website appears to be offline. (Update: the site came back online just before 3 PM EST.)

The company didn't tell anybody about the hack in 2014, according to the blog post, apparently figuring that since they were making money at the time, and had reserves of currency they could lean on to keep the exchange afloat, everything was just fine.

Here's how that brilliant business plan worked out: according to Cryptsy's blog post, problems began when Coin Fire (now 99bitcoins) published an article in October of 2015 claiming Cryptsy was under federal investigation, which Cryptsy CEO Paul Vernon dismissed as "libelous." This caused a "bank-run," Cryptsy's Thursday blog post states, and the coin in their reserves couldn't cover all their customers' withdrawals. The timing of the Coin Fire article coincides with the worst of Cryptsy's service interruptions, for which Cryptsy users have received various explanations, including server failures and DDoS attacks.

"... the entire community will be looking for you"

The good news is that the coins stolen in the hack are apparently sitting, uncollected, in a Bitcoin wallet, meaning they can be returned by whoever has the key. Cryptsy's bounty—1,000 bitcoins—will go to whomever can provide information leading to the coins' return.

"If they are returned, then we will assume that no harm was meant and will not take any action to reveal who you are," Cryptsy's post states. "If not, well, then I suppose the entire community will be looking for you."

Cryptsy did not immediately respond to Motherboard's request for comment.

The confession and bounty came a day after a Cryptsy customer filed a class action lawsuit in Florida. The lawsuit alleges "bad faith and unfair and unlawful conduct" on the part of Cryptsy, stemming from its users' inability to retrieve their funds from the site beginning in the fall of 2015, which coincided with the Coin Fire piece that Cryptsy blames for its troubles.

In a casual and frankly baffling aside explaining why Cryptsy didn't go to the cops as soon as the hack happened, the company blog post also states that at one point Cryptsy had "open communication" with disgraced Secret Service agent Shaun Bridges on an "unrelated matter." Bridges was recently sentenced to prison for stealing 20,000 bitcoins and setting up a cooperating witness for the theft while he was a member of the Silk Road Task Force investigating Ross Ulbricht for running the dark web drug market. Cryptsy says that Bridges was "no longer somebody we could report [the hack] to."

It's a fitting end to one of Bitcoin's most turbulent weeks ever, which also saw Mike Hearn, one of a handful of core developers who have been working on the cryptocurrency's open source code since the beginning, declare the whole experiment an abject failure.

Bitcoin has weathered many storms, and some have arguably been worse than this. Commentators also said Bitcoin might be dead after the massive Mt. Gox exchange crumbled, following a theft that caused the exchange to file for bankruptcy in 2014. But at this point, I think a fair question to ask alongside, "Is Bitcoin dead?" is, "Even if it isn't, is any of this really worth it?"

The answer to that question may depend on how you feel about daytime soaps.