Have there been cases of traditional money theft from Bitcoin exchanges?

There have been a number of cases of thefts or losses of Bitcoins from a few Bitocoin exchanges, but has there ever been a case of traditional currency being stolen or lost by an exchange?

Answer

It is unlikely you’ld find an exchange that hasn’t lost funds due to theft.

Mt. Gox, before Tibanne bought it, used to accept PayPal for payment. It was fraudulent PayPal transactions that assisted in driving the exchange rate from $0.06 per BTC (yes, that is correct) in October, 2010 to a level twice that in about two days. PayPal closed the account and froze the funds, but the thief had withdrawn bitcoins.

BitcoinGateway (now defunct) was the next up and experienced some fraudulent credit card charges (though their credit card merchant account got yanked once the it was figured out what the term “digital goods” really meant.)

Then it was CoinPal’s turn in which they battled a hack that made it appear the charge was successful, and bitcoins were paid out. Later, fraudulent charges were experienced but were maintained at manageable levels — before PayPal closed their account and froze the funds, causing the service to shut down.

Some believe that Dwolla’s actions against TradeHill (now defunct) were theft of dollars, but that was simply an accounting action where numbers for TradeHill’s account with Dwolla were updated and there was not a hacking into TradeHill’s systems.

Bitcoin7 (now defunct) claimed to have had to deal with a stolen bank funds at one time, I believe. I don’t remember the details.

Even recently, BitPiggy, for instance, has suspended service due to their bank feezing funds after stolen monies were sent to the exchange.

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