17,000 Bitcoin Gone in a Click: The Exchange That Deleted Its Fortune

Ctrl+Alt+Oops—how one exchange wiped out a nine-figure crypto vault.

The $1.2B blunder that redefined 'cold storage'

A single corrupted wallet file turned 17,000 BTC into digital ghost money. No hacks, no exit scams—just an 'administrative error' that would make any CFO reach for the Xanax.

When backups bite back

The exchange claims its disaster recovery plan 'existed in theory.' Meanwhile, traders learned the hard way that not all financial innovation involves blockchain—sometimes it's just old-fashioned incompetence.

Final thought: At least the SEC can't fine them for market manipulation... this time.

Szabat then offered to sell Bitomat the euro equivalent of 17,000 BTC ($220,000 then, $1.95 billion today), in an overt effort to make users whole. 

“I wish to inform you that I had several conversations with potential investors from home and abroad,” he said, and directed anyone interested to reach out via email.

It was actually Mark Karpeles and Mt. Gox that answered the call. The deal meant Bitomat would shut down altogether and its domain would instead forward existing users to a Polish-language localized version of Mt. Gox, where they could log in as normal and trade bitcoin via a new Polish złoty pair.

“The acquisition of Bitomat.pl is a windfall for its users, especially in the wake of such a sudden and unsettling event. Also, for the first time ever on a bitcoin exchange, users are now able to access a substantially larger market with their local currency, so we think it’s a happy ending all around,” Karpeles said at the time. 

Mt. Gox had only months earlier suffered through two of its many hacking incidents, one for 80,000 BTC ($~65,000) when a thief was able to copy the platform’s own wallet.dat file, and another for 300,000 BTC ($~1.5 million) two months later, with the hacker eventually returning all but 3,000 of the stolen coins. 

Of course, Mt. Gox would go completely belly-up nearly three years later, potentially affecting any Bitomat users who had migrated over for a second time. 

There’s no question that modern day crypto exchanges, at least the top-tier ones, are different beasts compared to the earliest platforms like Bitomat and Mt. Gox. But for all their assurances, we can never really know for sure how well exchanges are storing user bitcoin. 

This is both the coolest and hardest part of using Bitcoin: It takes trust to trade bitcoin and significant operational security to store it yourself (although multi-sigs do help). Anything else is just managing exposure. 

If it were easy, everyone would do it. Until then, in exchanges we trust.

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