A recent blog post by Paul Vernon, CEO Cryptsy, is alleging that the exchange suffered a massive hack in July of 2014. Vernon claims that the hacker was the developer of Lucky7Coin, an alternative digital currency that had an IRC Trojan embedded in the code of the wallet that resided on Cryptsy’s servers.

“After a period of time of investigation it was found that the developer of Lucky7Coin had placed an IRC backdoor into the code of wallet, which allowed it to act as a sort of a Trojan, or command and control unit.”

The supposed theft cost the exchange approximately 13,000 BTC and 300,000 LTC. According to the blog post, Cryptsy staff decided that it would be a good idea to use the site’s profits to covers existing withdrawal requests by customers in order to avoid shutting down, “The decision was made to pull from our profits to fill these wallets back up over time, thus attempting to avert complete closure of the website at that time.“

Vernon claims that an expose written by Coinfire, which accused the exchange of being under investigation by the authorities, caused mass withdrawals that crippled Cryptsy for good.

“The article basically caused a bank-run, and since we only had so much in reserves for those currencies problems began.”

A reward of 1000 BTC has been offered by Cryptsy for information leading to the recovery of the stolen funds. All withdrawals are currently halted on Cryptsy as it faces a class action lawsuit by its clients in Florida.

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Source: http://blog.cryptsy.com/post/137323646202/announcement

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