Flexcoin, a Canada-based bitcoin bank, said it was closing down after losing bitcoins worth about $600,000 to a hacker attack enabled by flaws in its software code.
Flexcoin said in a message on its website that all 896 bitcoins stored online were stolen on Sunday. Its collapse came after Mt. Gox, once the world's dominant bitcoin exchange, filed for bankruptcy protection in Japan and said it may have lost some 850,000 bitcoins due to hacking.
"As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately," Flexcoin said. (r.reuters.com/web47v)
It later posted an update on its site saying that the attack exploited a flaw in its code on transfers between users and involved inundating the system with simultaneous requests to move coins between accounts.
"Flexcoin has made every attempt to keep our servers as secure as possible, including regular testing," it said, adding it had repelled thousands of attacks over the past few years. "But in the end, this was simply not enough."
The Alberta, Canada-based firm, which said it is working with law enforcement agencies to trace the source of the hack, said it would return bitcoins stored offline, or in "cold storage", to users.
Cold storage coins are held in computers not connected to the internet and therefore cannot be hacked.
Flexcoin said on February 25 it was not affected by Mt. Gox's closure. "While the Mt. Gox closure is unfortunate, we at Flexcoin have not lost anything," it had tweeted then.
Bitcoin is a digital currency that, unlike conventional money, is bought and sold on a peer-to-peer network independent of central control. Its value soared last year, and the total worth of bitcoins minted is now about $7 billion.
According to Bitstamp, one of the largest exchanges for trading bitcoins, a bitcoin was valued at about $658 on Wednesday.
(Reporting by Ritsuko Ando in Tokyo and Mridhula Raghavan in Bangalore; Editing by Saumyadeb Chakrabarty and Ian Geoghegan)